The U.S. stock market is being shaken as the "Magnificent Seven," a group of powerful megacap technology companies, sends a bearish warning to investors. These elite stocks, which have been driving this year's rally, have broken below the neckline of a significant technical price chart pattern, signaling the potential for more losses ahead.

According to Michael Kramer, a renowned independent stock-market analyst and the founder of Mott Capital Management, a composite index of these top companies has shown a "triple top" pattern. This pattern refers to a stock or index repeatedly failing to surpass a crucial high point. The Magnificent Seven reached their closing high for the year on July 18, when the composite index closed at 110.11.

Since then, these stocks have been tested twice more, on August 31 and October 11, with decreasing results each time. While the market could still go either way, Kramer believes that the outlook for the Magnificent Seven, and the Nasdaq as a whole, is becoming increasingly grim.

The Nasdaq Composite, a comprehensive index that includes all stocks listed on the Nasdaq exchange but is heavily dominated by the Magnificent Seven, is currently drifting further into correction territory. Its sister index, the Nasdaq 100, is also at risk of joining the downtrend, according to Dow Jones Market Data.

This downward trend has been attributed to rising yields on 10-year and 30-year Treasuries, reaching their highest levels in 16 years. The recent climb in treasury yields, with the 10-year Treasury briefly surpassing 5%, has put pressure on stocks. Despite strong economic data released on Thursday, including a booming U.S. economy during the summer months, the disappointing earnings and guidance from companies like Alphabet Inc. and Meta Platforms Inc. have weighed down the Magnificent Seven.

It is worth noting that without the prominent influence of the Magnificent Seven, the broader market, as represented by the S&P 500, would have experienced significant year-to-date losses. Data from Dow Jones Market Data reveals that the group's aggregate market capitalization increased by $3.6 trillion through Wednesday's close, offsetting the losses of the remaining 493 companies in the index.

Investors are now eagerly awaiting earnings reports from Amazon.com Inc., another member of the elite stocks, after the markets close on Thursday. However, the market's attention is particularly drawn to the darling of the group, Nvidia Corp., along with other notable members Apple Inc. and Microsoft Corp., as their performance could have a substantial impact on market sentiment.

As the stock market faces increasing uncertainty, investors should remain cautious and closely monitor the performance of these influential companies. The outcome of the Magnificent Seven's performance in the coming weeks may serve as a key indicator for the overall direction of the market.