Mag-7 or Lag-7?
Is market leadership shifting away from the Magnificent Seven? While the S&P 500 moves sideways, a clear rotation is unfolding beneath the surface: Mag-7 stocks are struggling, the rest of the market is gaining strength, Japan and emerging markets are outperforming the U.S., and Bitcoin has dropped to test the $60,000 level. Are we witnessing the start of a new market phase — or just a pause before the next move higher?
This content has been produced by Kvarn Capital Oy, a licensed crypto-asset service provider supervised by the Finnish Financial Supervisory Authority. This content is intended for informational purposes only and should not be interpreted as investment advice or recommendation. All investing in crypto-assets involves significant risks, and past performance is not a guarantee of future returns. Crypto-assets are not covered by investor compensation schemes or deposit guarantee schemes.
Key points
- S&P 500 stalls in a sideways grind, but look under the hood: market is thriving outside the "Magnificent Seven."
- The global rotation is real, with international markets currently outpacing the U.S.
- Crypto pain continues as Bitcoin tests the critical $60,000 floor.
Quick Recap: Last Week
Last week in Kvarn Pulse, we highlighted a market caught in a tug-of-war. At the index level, the S&P 500 was essentially treading water, and Bitcoin was clearly struggling. Yet, beneath the surface, specific sectors within the S&P 500 were showing remarkable resilience.
To recap our stance from seven days ago:
- The S&P 500 is shifting sideways, but sector-specific strength remains high.
- Gold’s historic rally hit a wall with a sharp, textbook correction.
- The crypto downtrend remains the path of least resistance.
S&P 500: Churning in Place
The upward momentum we enjoyed for months has transitioned into a trendless, sideways shuffle. For nearly two months now, the S&P 500 has been "sawing" back and forth within a tight range between 6,800 and 7,000 points.
Technically speaking, the index is still holding above its rising 50-day moving average, which is a positive sign for the bulls. Furthermore, the Relative Strength Index (RSI) remains above 50, showing that the underlying trend hasn't completely broken.
However, there’s a fly in the ointment: the RSI has begun printing lower highs and lower lows.
This loss of momentum is a classic "fading" signal often seen at market peaks before a potential transition into a bear market. We saw a strikingly similar pattern in early 2025 just before the "Liberation Day" panic.
If you believe Bitcoin acts as the "canary in the coal mine" for risk appetite, take note: in 2025, Bitcoin peaked a month before the S&P 500. We could be seeing a similar lead-lag relationship developing right now.
Is it time to hit the panic button? Not yet. From a technical standpoint, the uptrend is technically intact until proven otherwise. We are treating this as a consolidation phase for now, but we’ve marked 6,800 as our "line in the sand." A break below that level would signal that the bulls have lost control.
Mag-7 or Lag-7?
The lack of progress at the index level is largely due to the exhaustion of the "Magnificent Seven." These tech titans have carried the market for years, but with their massive index weighting, it’s nearly impossible for the S&P 500 to climb if they aren't participating.
The Roundhill Magnificent Seven (MAGS) ETF has recently slipped below its 20, 50, and 100-day moving averages. Seeing these longer-term averages turn downward suggests this isn't just a brief dip, but a period of prolonged weakness.
If you look outside the Mag-7, the story changes completely. Defiance Large Cap Ex-Magnificent Seven ETF (XMAG) is in an unambiguous uptrend, outperforming the Mag-7 by nearly 11 percentage points over the last three months.
The script has flipped. In 2024, the Mag-7 were the only game in town while everything else lagged. Today, Big Tech (with the possible exception of Alphabet) is the anchor, while Materials and Consumer Staples are doing the heavy lifting.
"Sell America"?
One of the most fascinating developments this year is the U.S. market’s sudden underperformance compared to the rest of the world.
Over the past month, the U.S. (via SXR8) has lagged dramatically behind Europe (EXSA), Emerging Markets (VFEA), and especially Japan (SXR5). We’re talking about performance gaps of 4–9% in just 30 days. That is a massive divergence.
6-month chart tells the same story.
Some analysts are calling this the "Sell America" trade, citing U.S. political uncertainty. While that may play a role, we see a simpler mechanical driver: Sector Rotation.
The U.S. market is incredibly tech-heavy. When investors rotate out of Growth/Tech and into Value/Industrials/Energy, the U.S. naturally suffers more than international markets which are more heavily weighted toward those "traditional" sectors.
If (when?) the focus returns to Growth and AI, the U.S. will likely reclaim its crown. But for the active investor right now, the "hot money" is clearly flowing into Japan, Europe, and Emerging Markets.
Crypto: Testing the Floor
The crypto market has been in a steep retreat, with Bitcoin shedding roughly 25% of its value in just two weeks. We saw a brief "flash crash" to the $60,000 level last week, followed by a standard relief bounce.
However, that bounce looks fragile. We haven't seen the kind of aggressive "V-shaped" recovery that usually signals a definitive bottom. We believe there is a high probability that the $60,000 level will be tested again shortly. While that level provided a nice scalp for fast-moving traders, we advise extreme caution for longer-term positions until a trend reversal is confirmed.
With crypto stumbling, traditional sectors surging, and international markets leading the charge, market sit in a quite fascinating spot. We'll continue to track these rotations and keep you updated in the next Kvarn Pulse!
The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.