Big Tech stocks are on the cusp of creating a setback for indexes

Mega-cap technology stocks have driven the Nasdaq and S&P 500 higher while, like a shiny veneer, they’ve masked broader stock market weakness.

But there’s reason to believe that the covering may soon come off as mega-caps turn into a liability for the broader market.

Here’s the 2020 performance (as of July 30) of mega-cap tech stocks compared with the Nasdaq-100 NDX, +1.77%, S&P 500 SPX, +0.76%, Dow Jones Industrial Average DJIA, +0.43% and Russell 2000 RUT, -0.98%.

Facebook FB, +8.17% : +14.25%

Amazon AMZN, +3.69% : +65.16%

Apple AAPL, +10.46% : +31.03%

Microsoft MSFT, +0.54% : +29.30%

Netflix NFLX, +0.63% : +50.14%

Alphabet GOOGL, -3.27% : +14.86%

Nasdaq-100: +22.70%

S&P 500: -0.48%

Dow Jones Industrial Average: -7.80

Russell 2000: -10.39%

Indexes with the lowest exposure to mega-cap tech have performed the worst.

The chart below quantifies the dominance of mega-cap tech stocks. The black graph is an equal-weighted index of Amazon, Apple, Facebook, Microsoft, Netflix, Alphabet — let’s call it the FAAMNG index. (The “G” stands for Alphabet unit Google.)

From the start of 2009, the FAAMNG index soared as much as 4,089%, while the Nasdaq-100 gained “only” 757%.

Mega-cap leadership has been long-term bullish. The zoomed-in

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