By order of panes:
Upper
S&P500 (weighted according to its market capitalisation) / S&P500 equal-weighted index (this assumes all index constituents have the exact same index weight)
Middle
% of companies (in the S&P500) trading above the 20-day MA
Lower
% of companies (in the S&P500) trading at 4-week highs
There has been so much focus on the poor index breadth and participation in the NAS100 and US500 of late, and this chart portrays it well. The bears are clinging to the notion that if we lose leadership from mega-cap tech (and notably the AI thematic) then the broader index will roll over and head lower. That could be the case, however, we could also see investors switch to other areas of the market. Backtesting prior periods where we see the S&P500 equal-weighted index underperform by such a wide margin (with such concentrated breadth) offers no statistical evidence that the index is about to crash.
Still, consider that all the index gains this year have come from 7 stocks (Apple, Microsoft, NVIDIA, Alphabet, Amazon, Meta and Tesla), so if we lose this leadership, then the index may find it hard to push further higher. For now, momentum favours further index upside.
HK50 index
while we see strength and momentum in the US tech-heavy indices, we’re seeing a heavy tape in the HK50, with the HK50 not far off a 20% drawdown from the 27 Jan highs. Poor China economic data, renewed tensions with the US, and uninspiring earnings from MSCI China companies (reported earnings have missed consensus by 20.7%) have all weighed and resulted in a capital flight from Chinese markets. The technicals remain heavy, and subsequently, I still favour further downside in the HK index towards 17,700 – that said, there are risks that authorities address the weakness in the capital markets soon – for now, international capital is weary of being overweight HK/China at this point.