Chart Advisor: Weakness Under The Hood On A Quiet Day

Articles From: Investopedia
Website: Investopedia

By Michael Nauss, CMT, CAIA, CDMS

1/ Indexes

2/ Advance Decline

3/ Equal vs Cap Weighted

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1/ Indexes

Overall indexes did not move much yesterday with only a -.47% move in the S&P 500. Still closing within the range of the prior week. However, looking under the hood of individual names we see a pretty red tape. 

2/ Advance Decline

The below chart shows all US equities, how many are up or down on the day and by how much. Generally, with a small move in the overall markets, you would expect to see an even distribution of stocks up and down but we are seeing a big red slant.

In more charts below let’s try to find where the strength and weakness is. 

3/ Equal vs Cap Weighted

The S&P 500 is the 500 biggest companies in the US and is generally weighted by market cap. This means that the biggest names can move the price more than the smaller ones.

However, the RSP takes the same 500 stocks and weights them equally so sometimes you get a good idea of what’s going on under the hood since a lot of names moving in one direction cannot be countered but a few big ones moving the other way. 

From the first chart you can see that we were down much more today in the equal weight index vs the cap weight. The second chart just confirms this with comparing the action of the two (RSP Blue and SPY Pink) from today on one screen. 

The question is if this continues how long can the star stocks hold up the rest of the market?

Originally posted 6th September 2023

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