The market’s strength is questioned, with 10 stocks comprising almost 40% of the S&P 500’s weight, driving its rise for the last year and a half. The average stock, especially in the energy sector, is underweighted. Hedge fund managers have the least exposure to energy in a decade. If key tech stocks or the “Magnificent 7” falter, a significant sell-off could occur. NVIDIA’s (NASDAQ: NVDA) influence is notable, supporting other mega techs. Market breadth is poor, with buying concentrated in tech stocks and small-cap stocks suffering despite good earnings. Comparisons to 1999’s NASDAQ (NASDAQ: NDAQ) collapse are made, but the current tech giants have substantial earnings, unlike the dot-com companies.

Transcript:

Lee, is the market strong or is it weak?

And if it’s sort of weak, what makes it look strong?

Well, I mean, 10 stocks now make up what almost 40% of the weight and the S&P 500.

They are the only ones that have driven this market rise for the last year and a half.

The average stock, which is very underweighted energy is the hedge fund managers have the least weighting to energy they’ve had in like 10 years.

And if NVIDIA cracks or if the tech or the Magnificent 7 crack, there’s going to be a big sell-off.

If you look at what you’re saying about the 40% of the S&P 500 is right.

But if you look at just NVIDIA and you compare it with what has happened with the other mega techs, they’re all riding on NVIDIA’s back.

Oh, absolutely.

And the market breadth is horrible.

You know, it’s all the buying and all of the long buying is concentrated on tech stocks.

It’s not across the board at all.

And the small-cap stocks have been absolutely pounded over the last year, even though most of them came in with good earnings.

Does this look at all to you like 1999?

Is there any whiff of that NASDAQ collapse in the air?

I was right. I was a salesman at Bear Stearns right in the thick of that.

And the big difference, at least with the Magnificent Seven versus then, it was like a lot of those companies, you know, Pets.com and all the dot-com companies, they had no earnings.

They had absolutely no earnings.

The Magnificent Seven have huge earnings, but they’re getting expensive on a multiple basis.

So I don’t really see it as much like that.

But the mania is sort of like that.

I mean, the stuff that compares with that is like the roaring kitty buying and selling loads of GameStop.

Now that reeks of it, but I don’t know if this does.

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