Market Milestones: Equal Weighting Paints a Different Picture

[Image] Good morning ! It’s Friday, Friday, gotta get down on Friday. If Rebecca Black’s song “Friday” does not pop into your head at least occasionally on a Friday morning you apparently were doing more productive things in 2011 than I was. If you have no idea what I’m talking about, do yourself a favor and keep on reading without any further Googling. The bulls stood their ground at key support and for the last 5 days we have seen a nice bull move on the SPY and the QQQ. We closed strongly above the FOMC candle on Thursday, trapping the last of the bears and making a continued grind higher even more likely. Despite the seemingly volatile price action we have had over the last few months, the market is extremely sideways when you zoom out. We were trading at these same prices back in May of 2022. That is 330 days of chop, sideways action and consolidation. SPY [Image]( A question worth asking is, what is sustaining this current bullish price action, and can we keep pushing higher? The answer is always yes, we can push higher, and it looks like we are going to. Let’s talk about what is driving this price movement since the financials, including large banks, are still falling and overall market breadth is weak. The answer to that question comes when we look at the weightings of SPY and QQQ. AAPL, MSFT, AMZN, NVDA and GOOGL make up 20% of the SPY. MSFT, AAPL, AMZN, NVDA, GOOGL and TSLA make up an astounding 47.27% of the QQQ. This means that the top 5-8 stocks can make or break the market. This is what happened during 2021. Big tech saddled up their horses, threw the market on their backs and drug it higher for an entire year. When we look at RSP, which is the Equal Weighted SPY, we see a slightly different story playing out. RSP recently took out the higher low from December 2022 and is just barely poking its head above the 200Dsma. Without the big tech oversized weighting, the market is still struggling to gain bullish traction. I will grant you that RPS has a pretty cute little double bottom with what could be a bear trap at the lows. RSP [Image]( The market weighting becomes even more important when we look at the big tech names to see if they can sustain their current rallies. First, let’s look at MSFT, the largest component of QQQ and 2nd largest of SPY. MSFT has some major gap fills, trend lines, horizontal resistance all of which are converging in the $285-$295 area. It also seems to be in a wave 5 of a wave 5. All of that to say that MSFT has some pretty solid resistance right above its current price action. Even if the bulls are in control on the big picture again, and we are headed for new highs, that would still mean MSFT will likely pull back into the $260 area before a continuation higher. MSFT [Image]( AAPL has been on an absolute rampage this year and is up 25% in 2023. That is a 25% move in 3 months on the biggest company in the entire world. It’s no NVDA (the 4th largest weighting of the QQQ) which is up an astronomical 90% in 2023. NVDA is getting very extended, in a wave 3 and about 5% away from a solid resistance. Not that any kind of resistance has mattered at all to NVDA for the last 3 months. Luckily our [Traders Plan]( portfolio has been long NVDA since Jan 17th for a 60% gain at the moment! Hey wasn’t this paragraph about AAPL? Anyway, looking at AAPL’s chart we can see there is a solid resistance in the $170 area, about 5% away. AAPL [Image]( NVDA [Image]( This is already a very chart heavy episode of Market Milestones so I will not go in depth through GOOGL, AMZN or TSLA, but each could make one more relative high before we get a bigger pullback. GOOGL and AMZN are actually showing some relative weakness at the moment. To sum up our findings, big tech could push higher for another week or two but there is strong overhead resistance on most charts including the SPY. If SPY is able to push up into the $415-$420 region, the risk reward will have skewed towards the bear side, yet again. If big tech starts to pull back while banks, and the rest of the market are still sluggish we could see a decent dip. Enjoy your weekend, Yates Craig, RLT & TPP Market Analyst Disclosure: You are responsible for your own trading decisions. ALWAYS, do your own research before investing in any of the above securities. This is not a solicitation to buy/sell ETFs or securities. NEVER invest money in ETFs or stocks that you can't afford to lose. You can lose all of your capital by trading any securities mentioned. These ETFs/securities are very volatile and gain and lose value quickly. We reserve the right to freely trade in any mentioned ETFs or securities. We are not compensated by any mentioned companies. We trade ETFs and securities based on our opinion of intrinsic/possible future value only. We are not registered investment advisors, so always do your own research before buying any securities. Unable to view? Read it [online]( If you no longer wish to receive mail from us, you can [unsubscribe]( Sent from: Real Life Trading in Nashville TN 37221