Thomas Peterffy, CEO of Interactive Brokers, revealed that the “Magnificent 7” — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — account for over 70% of daily trading volumes on their platform. This concentration signals a troubling lack of interest in other market sectors like industry, pharmaceuticals, and raw materials.
$IBKR CEO Thomas Peterffy says Magnificent 7 now represent over 70% of daily trading volumes on their platform.
He also "hopes" equity prices don't "come down too fast" so they can liquidate their positions as it happens… A little concerning that he promptly deleted this post. https://t.co/oO7HCGeJgc pic.twitter.com/pnrMT7iXUu
— Financelot (@FinanceLancelot) December 13, 2024
Peterffy expressed concerns, stating he “hopes” equity prices don’t “come down too fast” to allow for an orderly liquidation of positions. His deleted comment raises suspicions about top investors’ market intentions. The stock market has reached a disturbing milestone, achieving something it hasn’t since 2001: nine consecutive days of more stocks falling than rising, known as negative breadth. Yet, the NASDAQ hit an all-time high, highlighting a significant disconnect between market indices and individual stock performance.
The implications are stark. With the Magnificent 7 driving market performance, any downturn in these stocks could lead to a market-wide sell-off. The situation is worsened by a 16% rise in margin lending at Interactive Brokers over the past three months, indicating increased risk-taking. Peterffy himself cautioned that a rapid decline in stock prices could leave the broker bearing the burden of clients’ margin calls.
This scenario mirrors the dot-com bubble of the late 1990s, when a handful of tech stocks dominated the market until the bubble burst. The current market’s negative breadth — where more stocks are declining than advancing — serves as a warning sign of a potential market top. According to David Keller, President and Chief Strategist at Sierra Alpha Research, 30% of the S&P 500 stocks have already dropped below their 50-day moving average, signaling short-term weakness.
The most alarming detail is the overwhelming dominance of the Magnificent 7 in daily trading volumes. This level of concentration is unprecedented and raises concerns about the market’s dependency on these few stocks. Craig Johnson, Chief Market Technician at Piper Sandler, noted that weakening market breadth could signal an imminent peak.
The fallout from this situation could be catastrophic. If the top 1% begins to dump shares, it could trigger a broader sell-off, deepening the negative breadth and causing a sharp drop in equity prices. This underscores the critical importance of diversification and the dangers of relying too heavily on a few high-performing stocks.
"Overconfidence is the most dangerous thing in trading."
Marty Schwartz pic.twitter.com/9dvgK21L8H
— Guilherme Tavares (@i3_invest) December 12, 2024
The stock market achieved something it has not done since 2001…nine straight days of more stocks dropping than going up (negative breadth). All while the NASDAQ made a new all-time high yesterday. Food for thought.
— Gareth Soloway (@GarethSoloway) December 12, 2024
BREAKING: The stock market is officially the most expensive of the modern era, as the S&P 500 now surpasses its 2021 bubble peak on a price-to-sales ratio. pic.twitter.com/QlBOWpH01j
— Jacob King (@JacobKinge) December 13, 2024
Sources:
https://investors.interactivebrokers.com/download/ir/1Q24_Earnings_Call_Transcript.pdf
https://finance.yahoo.com/news/q2-2024-interactive-brokers-group-143101050.html
https://www.marketscreener.com/news/latest/Speculative-bubble-Some-news-from-the-front-48587132/
https://stockcharts.com/articles/mindfulinvestor/2024/10/will-breadth-divergences-signa-307.html
https://stockcharts.com/articles/mindfulinvestor/2024/10/does-the-market-have-bad-bread-143.html