In this analysis I will explain some fundamental concepts about the S&P 500 and how to prepare for a trade in this new week.
The S&P 500 Index is market cap weighted. This method divides the market cap of a company by an index’s total market capitalization to determine the weights. This results in a weightings ranking that matches a market cap ranking.
The stocks of Apple, Amazon, Alphabet, Microsoft and Facebook, the five largest publicly traded companies in America, rose 37 percent in the first seven months this year, while all the other stocks in the S&P 500 fell a combined 6 percent.
This is crazy. This is hardly anywhere close what the SP500 was initially built for. It doesn't give you any proper diversification anymore. It's really basically a SP5 Technology Index now instead of a SP500.
It's important to realize this, as you might think that the stock exchange market has completely recovered from COVID-19. It hasn't.
The major tech companies recovered quickly, as they moved to working from home policies smoothly and had even opportunities rapidly scaling their online business.
The brick and mortar companies didn't. If you want serious gains, consider investing in those companies that didn't recover yet such as Wells Fargo, Bank of America, Hartford Financial Services, or YUM! Brands.
Only a fool will try to bet against the market and hold a short position over a really long time, but I still suggest a temporary short position here. What I mean with that is that this is not a great entry for a long on SPX, especially directly against a zone of incredibly strong resistance.
Make sure to follow the age-old principle of buying low and selling high. The price is not low right now, not enough to justify a long position.
What I suggest is to wait for another retracement, and get a better entry in. You can ride a short position until we get there, or just wait for a retracement and go long when you see fit. I think a value of around $3250 should do for this purpose.
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- Trading Guru
-------------------------------------------------------------- Disclaimer! This post does not provide financial advice. It is for educational purposes only!
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N0tSwift
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IMO the market is trading sideways waiting on a second stimulus. If it gets it (low odds now with the House in recess), it goes up, else down.
Gpap90
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All the way up or all the way down! Easy money not anymore...
giova.coppo
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Bravo, good job
Joseph22
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So it means Nasdaq is going down for a while to retest the price of 11221
DarkWI
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I totally agree with you. The technology bubble is blowing. The economy is not doing well, but pumping the market with money is doing its job. The growth of one sector of the economy is very bad.
Trading-Guru
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I will be posting more of these regularly, so follow me to find out about great trading opportunities
Trading-Guru
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How would you have charted this? Feel free to post a link to your own idea here as well
Trading-Guru
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I’m curious to hear your thoughts! Let’s make use of the fantastic tradingview community and give each other feedback.