The Rock Trading Group
CMT, Technical/Situational Analysis, Options Trading
Magnificent Seven earnings next week are worth staying clear of, as price action and capex news have lowered expectations, though Apple might be OK. Amazon bounced off 225 in late June and took three weeks to reach 250, only to fail badly, and the reaction to Google's earnings showed Wall Street's mood. x.comÂ
Money rotating out of high-risk memory stocks should flow into the Magnificent Seven, which are close to capitulating and should outperform semis and memory into July. Some Mag 7 companies may signal slower capex in upcoming earnings, which would pull memory back down while the megacaps dominate summer and fall. South Korea's 7% drop hit memory stocks, yet Apple, Meta, Microsoft and Amazon traded higher. x.com x.com x.com x.comÂ
Apple's roughly 40 times trailing and 37 times forward earnings make the shares too expensive ahead of next week's results. A short looks reasonable, though a sell-the-news reaction after earnings remains uncertain. x.com x.comÂ
Hedge funds went too lopsided short before Amazon, Microsoft and Alphabet's earnings, setting up an aggressive short-covering rally if they deliver this week, as expected. SPCX crushed and ANT's S-1 was quite good, leaving a potential two-week rally on a razor's edge. x.comÂ
The Magnificent Seven will keep making investors rich and should consistently outperform the market, because they are super cheap relative to the S&P 500's P/E. The group covers Nvidia, Amazon, Apple, Microsoft, Tesla, Alphabet and Meta, along with the MAGS ETF that holds them. x.comÂ
Magnificent Seven stocks face continued pressure as AI capex keeps eating their free cash flow with no sign of slowing, and the market is not rewarding the builders for now despite the returns. The recipients of that spending in power, grid, chips and materials, such as TSMC, GE Vernova, Micron and ASML, look better. Concern is greatest for Tesla and Meta, whose recent moves seem disconnected and whose AI showcase was embarrassing; Microsoft, Amazon, Apple and Alphabet are less concerning. x.comÂ
Alphabet's AI capex payback is being repriced, making its post-earnings decline more than a one-day mood swing. Guidance and cloud and AI margin commentary are the near-term tests. If growth continues but the multiple compresses, the risk is duration in mega-cap AI, not a collapse in technology growth. x.comÂ
Magnificent Seven leadership has returned because analysts keep raising the bar for those companies while trimming 2029 estimates elsewhere. x.comÂ
Alphabet's higher capex guidance compounds the risk that already demanding revenue estimates must fall. The Street expected 25% revenue growth in 2027 and 21% in 2028; as 2028 earnings consensus resets, a 10% stock decline could be justified. x.comÂ
Apple is a safe haven amid AI-stock volatility and will gain momentum if it persists over the next two weeks through the midterms. New products and another defensive day bring a momentum push toward $358, then $367 in November closer. x.comÂ
The Magnificent Seven and memory makers rising together is the market's green light for the AI trade, because one firm's capex is another firm's revenue: the Magnificent Seven write the checks and the memory makers cash them. For a month, being right on one meant being wrong on the other, and that trend is ending. x.comÂ
Alphabet's businesses beyond search are why it will lead the real AI boom. Google Cloud, DeepMind and Waymo broaden its reach, and its $900 million SpaceX investment is now worth $85 billion. Fear emerging as the shares fall is an opportunity; a decline toward the buy zone is welcome, even as Q3 capex has taken a large hit out of free cash flow. x.com x.com x.com x.comÂ
