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SP500 stocks: The Equal Weight Experiment 
 July 09 2017 ( From TradingView )
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​We have been in one of the most Bullish Stock Market ​in history
​since 2009.​ The Mighty SP500 Index (SPY ETF) went from a ​low in
​March
​2009 ​​of ​67.10 to the high ever on June 9 2017 ​at 245.01, so  rose
​by a ​​factor ​​of 3.6 (excluding dividends) spurred by low interest ​rates and
​strong ​buybacks ​from ​US corporations and lately by the Trumpification
​of Financial Markets. (
See First Chart Below)

The market behavior have been to say the least atypical in 2017. As we
​reachedthe highest ever level in June 2017, most of our attention have
​been on Technology stocks. But the surprising part is that low beta stocks
have outperformed high beta stocks lately. Also, huge capitalization outperformed small capitalization.

​​​​​​​Another surprising behavior have been the out performance of only few big capitalization stocks (Apple, Microsoft, JP Morgan, Johnson & Johnson, Facebook, ...). Those overweight stocks in indices could be misleading to make a broad health statement on the overall stock market.

Taking the SP500 Equal Weight Index​​ (RSP ETF) as a proxy, the top 10 holdings of that ETF is 2.25% instead of 18.91% for the SPY ETF.  We can see on the second chart below that the Equal weight have been under performing since peaking on December 8 2016. It is now below the level reached before the US Election.

That kind of trend in that ratio have been in the past associated of warning signs of consolidation or correction phases coming in the months ahead as shown by the orange vertical lines Third Chart Below.​​
Is this time different?​

​​​​In Summary, we have now Generals (top 10 big capitalization stocks) that do lead the market tremendously. That tells me that it is becoming more and more a classic Institutional Investors big cap rally instead of a broad one. As the Institutional Investors are chasing aggressively more liquid stocks, the market becomes more risky (more concentration among indices) and is behaving like an end cycle bull market behavior. 


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 SP500 stocks: The Equal Weight Experiment  $SPY #investing #spy #SP500 

Daily RATIO
SP500 Equal Weight Index​ ETF RSP
over

​SP500 Index ETF SPY (Candles)

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Weekly RATIO (Top Panel)
SP500 Equal Weight Index​ ETF RSP
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​SP500 Index ETF SPY (Candles)

SP500 Index SPY ETF (Bottom Panel)

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Monthly Chart
​SP500 Index ETF SPY ( Candles)

Financialiceberg.Com