The Magnificent Seven

Heather Cullen

Heather Cullen

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In The Money

Heather Cullen In The Money Blog The Magnificent Seven

Who are the Magnificent Seven?

You’ve probably heard the expression. They are a group of companies that collectively make up more than one quarter of the S&P 500, and over half of the Nasdaq 100. They are:

    Microsoft (MSFT): $2.965 trillion

    Apple (AAPL): $2.623 trillion

    NVIDIA (NVDA): $2.065 trillion

    Alphabet (GOOGL; GOOG): $1.964 trillion

    Amazon (AMZN): $1.806 trillion

    Meta Platforms (META): 1.121 trillion

    Tesla (TSLA): $543 billion

Two things are immediately noticeable: 6 (all except Tesla) are in the trillion dollar club, and they are all technology companies.

The Trillion Dollar Club

The trillion dollar club has only six members. The nearest others are Berkshire Hathaway $880 billion, Lilly 699 billion, Broadcom 600 billion and JPMorgan 555 billion. I have put all of the trillion dollar club on the same chart, and you can see that they have mostly followed the same path since 2000.

Heather Cullen In The Money Blog The Magnificent Seven

The FANG Club

Of course, it was only 10 years ago that the buzz word was the FANGs:

    Facebook (now Meta)

    Amazon

    Netflix

    Google

And then they were joined by Apple, so the acronym had to be changed to FAANG. Interesting that they are all in the magnificent seven apart from Netflix, which has now dropped to 35 in terms of market cap.

The DOT COMs

If we go back to the dot com boom, we have a different crop of tech stocks:

    Microsoft

    Cisco Systems

    Intel

    Oracle

    IBM

    Dell

    Sun Microsystems

    Hewlett-Packard (HP)

Most of these have fallen from their former glory with only Microsoft having a market cap of more than $200 billion. Apple, at that stage, was small, with a market cap of $5 – 20 billion.

The Dark Ages

Just for fun (Ok, nerdy fun) I went back to 1970, before the advent of PCs, to find the top stocks were IBM, Xerox, HP, Texas Instruments, DEC, CDC and Intel. How the mighty have fallen!

Why all about technology stocks?

I see AI being a real disrupter, similar to the Internet, PCs and smartphones, because it has a profound impact across many industries who will need to adapt or reinvent their strategies. AI will force changes to existing business models and will create new market dynamics, which obviously affects the stock market.

Heather Cullen In The Money Blog The Magnificent Seven

How it will play out I don’t know, but I think we are witnessing a major change, and that technology stocks will continue to play an increasing role in market indexes.

OK, off the bandwagon.

Where to get this data

I have been using the data from Finviz.com.   It is a great resource.

 I particularly like its maps, which give a visual of  all sorts of things from 1 day to 1 year performance of stocks and ETFs,  dividends and earnings. Hours of fun. Here is the S&P 500 map.

To the markets . .

Well, I did breath a sigh of relief after Friday’s session. While I am confident of ITM’s performance, it always bothers me that people can’t always get in at the buy signal, and may (unfortunately) get in at the top of the market. There is always that risk. It happened at the start of 2022, when some people had just bought in and then we slid into a bear market. 

If you had bought in at the buy signal then you just lost some of the profits (and we were sitting on a nice profit) but if you bought in at the peak then you lost a fair whack of your capital – which made some people very angry. I received quite a bit of flack and nasty emails. I felt for people who had recently bought in and were suffering the pain of lost capital.

Heather Cullen In The Money Blog The Magnificent Seven

That gave me a few wakeful nights last week. Not concerned for myself, but for readers who had started recently. Seeing the market right itself was a huge relief; let’s hope it continues.

SPY Chart

Way back in the February 5 blog I said:

 I can’t help looking at the 500 level with trepidation.

The on the March 4 blog I said:

It (SPY) is trading solidly above the $500 level that I thought may have proved a resistance line, but I was wrong. (and am glad that I was!)

On the March 11 Blog I said:

I am still half expecting that there will be a dip to test the 500 level – but I hope that I am wrong!

Well, I didn’t get my wish – I was – unfortunately – right! SPY did dip to just below 500. I drew in the line with a question mark, and shortly after we started the dip towards it. As I said, I wish I had been wrong, but it is funny how often these patterns play out.

Whether the 500 level will hold as support I don’t know. If it dips below, then we will probably be on our way to 480. Not a pretty thought.

We can see that the 200 SMA is continuing to climb steadily, although the 20 SMA has been heading down. We know this is normal behavior as the shorter SMA reacts more quickly and is more volatile that the longer one. And in perspective you can see that the trend line starting November last year is definitely broken, but that SPY has ticked up significantly since then.

Heather Cullen In The Money Blog The Magnificent Seven

SPYG Chart

The chart is following the SPY chart very closely, showing signs of recovering from the dip:

Heather Cullen In The Money Blog The Magnificent Seven

We can see below that the resistance line I drew months ago did in fact turn out to be a strong resistance line.  We haven’t yet overcome it, but it looks as though we are heading back up there for another try. I hope so.

QQQ Daily

Like SPY, QQQ has bounced off the support line, and is heading up again.

Heather Cullen In The Money Blog The Magnificent Seven

The weekly chart shows that it didn’t quite reach the support line drawn in (at the previous high) but that’s good. Let’s hope that it doesn’t feel it needs to!

VIX Chart

We can see that the VIX is heading down again (thank goodness) and note that it didn’t get over 20. Anything below 20 is considered low volatility, and in the last year we have only been out of it briefly, last October during the big 11% dip, which was officially a correction.

NVDIAChart

I thought we would check in and see how NVIDIA is going. After dropping 10% in a day and closing at 762, it is now trading at 877, up 15% from its lows.

What a ride! This market is toying with us.    

Heather Cullen In The Money Blog The Magnificent Seven

ITMeter

Heather Cullen Blog ITMeter

The week ahead . .

Microsoft’s earnings were reported on Friday after the closing bell, and beat analyst expectations. GOOG also reported and promptly jumped 10%, here’s the chart:

Heather Cullen In The Money Blog The Magnificent Seven

These came after Meta (Facebook) spooked the market on Wednesday, it is so terribly jumpy right now. Everybody seems to be waiting for an excuse to dump their stocks and run.

Next week we have AAPL and AMZN, both trillion dollar stocks, and LLY which is the second biggest non-technology stock. Other tech stocks reporting are AMD and QCOM so there may be some volatility.

The Futures

The futures are up a bit, but it is still 11 hours to market open..

Heather Cullen Blog Futures

Fingers crossed for a good week.

Heather

Questions & Answers

18 thoughts on “The Magnificent Seven”

  1. I’m sure you have plenty of things to do, but if you’re interested in a book on DITM options on individual stocks, Mike Yuen’s “Intrinsic” might be worth a look.
    I found it to be similar to your approach and an interesting read,

    1. Hi Al
      I’ve just looked him up – he doesn’t have an eBook or a ‘look inside’ option unfortunately. It would be interesting to see his ToC.
      According to the blurbs he is using LEAPS on individual stocks – I rarley play with individual stocks, too unpredictable – but if he got it right then he would have cleaned up, and well done to him.
      Thank you for bringing it to my attention.
      h
      I checked his publication date – 2 months after me – phew! – can’t be accused of plagiarizing!

  2. Donna (Sheryl) Monroe

    Hi Heather,

    This is just an update. I am one of your SPYG account holders… I’ve been trying to execute a routine Roll Up and Out but Tastytrade kept sending a message of “sell only for this stock. Today I sent a request for explanation or solution. This is the reply I just received – thought it was interesting and may affect others ???

    As a firm, we have seen options with little to no volume used for fraud. The exchanges have been unwilling to work with us to combat this, so in order to protect our customers as well as the firm, we have set all trading on these symbols to closing only transactions until further notice.

    With this in mind, if you would still like to place trades on these symbols, please contact our trade desk directly at 312-724-7075 (7am-5pm CST Monday-Thursday and 7am-4pm CST Friday).

    1. Hey Donna – wow! Never seen anything like this before.
      I just checked on the Schwab platform and there seems to be no restrictions on there.
      Not sure what is going on – I’ll put it in the next blog and see if anyone else has had that with other brokers.
      What strikes / expiries were you looking at?
      Thank you for letting us know.
      h

  3. SPLG is a lower priced S&P 500 ETF (about $60/share) with monthly options and a lower expense ratio than SPY. Although the bid/ask spread is wider than SPY it may represent a opportunity for investors with a smaller account who wish to participate in the ITM program.

    1. Hi Pate? Baja?
      I’ve just checked the option chain, and share your concern about the spread. For the December expiry the 50% strike has a bid / ask of 28.50 / 31.90 which is a 12% spread. If you bought at the ask then the effective price would be $31,90 which is 3.2% above current price. For the 40 strike it is 19.10 / 22.90 which is a 90% spread and an effective price of $62.80 or 4.6% above current.
      The problem with big spreads is that you encounter them on the way in and the way out, so it can end up costing a fair bit of your profits.
      But in theory, yes, SPLG is an alternative.
      Thanks!
      h

  4. Hi Heather,

    Thank you for your insightful weekly blogs. I look forward to reading them every week. I’m so thankful that you do this for us, and I know that you don’t have to. People should know that the market has its ups and downs. Our balances therefore will be up and down. Plus, if they don’t get in at the golden cross, they risk not doing as well as your book has outlined. Please don’t take any of it personally. All you can do is offer advice and you explicitly state that you are not anyone’s personal financial advisor. If they don’t follow your program to a T, then they only have themselves to blame. Thanks again for taking time out of your schedule to help us and inform us of what is going on in the markets from an unbiased standpoint! Again, many thanks for all you do!

  5. Roger W Torstenson

    You are doing a wonderful job Heather.
    Just remember that no good deed goes unpunished; no matter how hard you try there will always be those who want to put you down.

  6. Hi again Heather! Quick question. I see a nice update today with the QQQ and it is up 1.73%. However when I look at my ITM QQQ option it is only up 1.1%. I bought it with less than 1% spread for time value . I wonder why I’m not getting the Leverage.? Maybe it’s a problem with liquidity? Interest rates? My normal stock of QQQ is performing better than the itm option. Don’t know why. Let me know if you have any insight. It’s always appreciated. Thanks.

    1. HI
      I noticed that too. Was rather disappointed at my portfolio balances.
      There is not problem with liquidity, what I think it is is the dividend payout date which is the 30th April. There is a dividend of $0.57345 which, of course, we don’t get as we are holding options. Although I also have some portfolio in straight out shares, so I can check on Tuesday.
      I’ve researched this, and this is the only explanation that makes sene in this situation.
      Lets see what happens today.
      h

      1. Hi Heather,
        I can appreciate your concern about those who have lost money. I can’t imagine it being your fault, however. There’s not always a signal to enter, and the strategy definitely dictates that you wait for the appropriate signal before entering the market. Looking out over the last 5 years, I believe you would have had minimal losses and much, much better gains had you just employed the strategy outlined in your book. Buying without the appropriate signal certainly opens you up to more risk and that is definitely outlined in the book as well.

        Don’t beat yourself up. Stress the importance of following the signals….. Sometimes you just have to sit in cash or in a money market account until the signal is given to enter. Good investing is about following rules. Good investing is also about exposing yourself to less risk. Your strategy does both. It manages risk while giving clear signals. Patience is a virtue for a reason…… Thanks for all you do!!

      1. Hi Jeff
        it depends on the options. Theta is a measure of time decay, so it gets larger as exiration gets closer.
        What options are you looking at (I mean strike & expiry date)
        h

  7. It’s difficult to check your trades in the ITM bull trades. For example, on Jan 3 2006 you show a sell and buy. You state that the correct strike price to purchase is 76 but there are no option trades going out the full time for option trades with a 76 strike price. Please clarify. Thanks.

    1. Hi David
      not sure if you mean now or then? There will be no options at strike 76 now. At the time, from memory, the backtesting used the nearest integer strike up until 30, then the nearest even number strike up to 100, then the nearest stike divisible by five thereafter. I think it is documented in the backtesting notes?
      Clearly, after 20 years it is impossible to get the actual options chain, but the assumptions were made using the best available data, and if there was any doubt I always chose the one that underestimated the results.
      Hope this helps.
      h

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Heather Cullen

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