Thanks largely to the seemingly inexorable rise in the mega-cap technology stocks, U.S. equities continue to drift higher relentlessly. Powering this trend are the stocks known under variations of "FANG" -- for Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOG). Apple (AAPL) and Microsoft (MSFT) are often included as well.
The rank enthusiasm was on display this week afterweaker-than-expected subscriber growth. But the dip buyers were ready and willing, pushing the Nasdaq Composite to a new high and cutting Netflix's loss to just over 5 percent in Tuesday's trading vs. a 14-percent-plus decline overnight.
Never before has an opening decline of 1 percent or more or more resulted in an end-of-day push to a new record high for the Nasdaq 100. This is truly uncharted territory as the FANGs -- on account of their bloated market capitalizations -- become more and more important to the performance of the broad market indexes.
On a technical basis, even as the S&P 500 stock index extends its push above the psychologically important 2,800 level, breadth remains tepid: Only 60 percent of stocks are in uptrends, as defined by "point-and-figure" charts. Compare that to the 65 percent that were in uptrends in June. Or the 83 percent in January.
According to Goldman Sachs (GS), as of July 1 Amazon alone was responsible for more than a third of the market's year-to-date gain. Amazon's 45 percent rise at that point accounted for 36 percent of the S&P 500's 3 percent gain including dividends. That's one stock out of an index of 500.
Widen the net to four stocks -- Amazon, Microsoft, Apple and Netflix -- and they account for 84 percent of the S&P 500's upside.
Doing a similar analysis, Bank of America Merrill Lynch (BAC), found that excluding Facebook, Apple, Amazon, Netflix and Alphabet, the S&P 500 would have fallen 0.7 percent in the first half of the year. That shows just how reliant the market is on the performance of the tech sector.
Analysts at SentimenTrader noted the Nasdaq 100's reversal and push to a record high and pointed out that prior similar occurrences resulted in some short-term weakness. Moreover, they found options traders are bracing for a big move either up or down, with a near-record probability of that move being violent during the next 30 days. That works out to something like a 15 percent chance.
The last time this signal flashed such a warning sign was in March, when the S&P 500 dropped a quick 2 percent and stayed subdued over the next month.
Also note: Morgan Stanley (MS) analysts downgraded tech stocks to "sell" earlier this month on concerns that the U.S.-China trade war had entered a "vicious cycle" that would end with a stock market sell-off.