Equal Weight S&P 500 vs. S&P 500

The meaning of the divergence.

If every stock in the S&P 500 was assigned an equal weighting, the price chart for the index takes on quite a different look and meaning. The chart most followed, the standard S&P 500, sports a heavier weighting for the few closely watched, big market capitalization tech stocks.

The weighted-in-favor-of tech stocks — the one most followed — S&P 500 ETF looks like this:

Note how far above its 200-day moving average this index fund sits.

Now take a look at how it appears for equal weighting of the 500 stocks, without regard to market cap:

Analyzed from this perspective, the “stock market” is already below the 200-day moving average a concerning, less-than-bullish look.

Most of the stocks within the S&P 500 are way behind the performance of the hot tech and social media components.