Monday trading opened with a gap higher, on news that the US and China would table their trade disagreements. After the Opening Bell markets then traded sideways the rest of the session. Industrials were pretty active while technology stocks failed to muster any real conviction from the bulls. That said, many stocks traded higher, so we need a convenient way to monitor stocks that eliminates their weighting.
Top 20 By Weight
The top 20 stocks on the S&P500 makeup more than 25% of the weighting in the index, so we need a convenient way to monitor the collective effect of the remaining 480 stocks when the markets are flat.
SPX Equal Weight Index
Removing the weighting metric reveals a bullish bias. Price action is contained within standard deviation one and two Bollinger Bands. The path is upward and the number of stocks contained therein that are trading above their respective 50ma has room to grow without reaching extreme levels. In other words, we can see higher price levels without reaching exhaustion.
Market Sentiment, Opinion, and the Facts
Since institutions drive the financial markets, it should be logical that our opinion matters very little. Yet, I see traders and investors make collective comments about the markets every day that make me cringe.
My view is simple. We either get on the “money bus” or we flip a coin and make financial decisions that are random at best. We should find means and methods that uncover what these money managers are actually doing. Understand how and where they are positioning their money and you’ll be on your way to a profitable future.
If the SPX Equal Weight Index continues higher, we’ll be adding to positions today.
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