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The stock market may be on the brink of a significant correction, according to a leading market expert. Craig Johnson, the chief market technician at Piper Sandler, has issued a warning about the future of the “Magnificent Seven” stocks.
What Happened: Johnson, in a recent appearance on CNBC’s Last Call, raised concerns about the future of the Magnificent Seven companies, which includes Microsoft Corp. (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), NVIDIA Corp. (NASDAQ:NVDA), Meta Platforms Inc. (NASDAQ:META), Tesla Inc. (NASDAQ:TSLA), Amazon.com Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL).
Johnson highlighted concerning patterns in the stock charts, including lower highs in Nvidia and a gap down in Apple and Microsoft. “These charts are rolling over, and they need to correct further,” he said.
He also expressed skepticism about the potential for small-cap stocks to continue outperforming large-cap stocks, a trend seen in 1984, 2002, and 2003.
Why It Matters: Johnson’s warning comes amid a series of events that have raised concerns about the stability of the stock market. In June, he pointed out several “warning flags” in the market, suggesting a potential market pullback, despite the historic performance of the SPDR S&P 500 ETF Trust‘s (NYSE:SPY) in 2024.
Meanwhile, Cathie Wood, the CEO of ARK Invest, has predicted a potential shift in the equity market, favoring small-cap stocks over large-cap tech companies due to the current “restrictive” monetary policy of the Federal Reserve.
On the other hand, Nvidia and other semiconductor stocks have been affected by the U.S.’s intensified semiconductor sanctions against China, raising concerns about the future of the tech industry.
Small-cap stocks have been on a remarkable streak. The iShares Russell 2000 ETF (NYSE:IWM) surged over 1.9% this week, driven by speculation about rate cuts following lower-than-expected June inflation data.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
