Technology and Financial Sector Analysis Report For The Week Starting 7/13/20
Many are wondering if the bear market will continue or have we seen the bottom in the bear market. There is probably no better clue than analyzing the S&P 500, but in particular the Technology and Financial Sector within the S&P 500.
The Standard & Poor's 500 Index (known commonly as the S&P 500) is an index with 500 of the top companies in the U.S. Stocks. Because the S&P 500 Index represents approximately 80% of the total value of the U.S. stock market, it’s the bellwether index for the U.S. stock market.
The U.S. stock market is the largest stock market in the world, it’s also the bellweather for equity markets around the world. The S&P 500 is arguably the most important stock market index on the planet.
The ETF, SPY represents the bellweather, the S&P 500 Index, which is a diversified large cap U.S. index that holds companies across all eleven sectors. One sector represented with a significant weighting is information technology.
The S&P 500 is a market capitalization-weighted index. The weight of a sector in the index is equal to the market cap of that sector divided by the total market cap of all the sectors.
The ETF, SPY represents the bellweather, the S&P 500 Index, which is a diversified large cap U.S. index that holds companies across all eleven sectors. The top two sectors in the SPY is technology (30%) and Financials (15%) which make up almost 50% of the SPY.
Regarding the XLK, the top holdings in the XLK are
@scaredycatguide wrote a post last night about the FAANG stocks has how much they have been carrying the US equity markets and that without FAANG, the US equity markets are flat. My interpretation would be the S&P 500 is flat, while the DOW and Russell 2000 would see losses.
The Entire Market is Being Pulled by 5 Stocks the Past 3 years
The Nasdaq (^IXIC), which touched fresh highs earlier this week, is like “a train that is moving faster than any train we've ever seen before,” says one veteran strategist.
“This is a very very strong rally and it looks similar to what happened pre-Covid collapse, where the Nasdaq went up 11 days in a row,” James McDonald, CEO of Hercules Investments, told Yahoo Finance.
The tech heavy index has seen seven out of eight sessions advancing this month, with many of the FAANG names hitting new intraday highs earlier this week.
“As an adviser, if someone hires me today, I can’t put them into FAANGs at these 52-week highs,” said McDonald. “We’re making money on the downside, buying puts at each of these tops.”
The chart suggests to go long on a pullback at the 4 hr demand zone at $105.
Regarding the XLF, the top holdings are
JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and other banks kick off this week with their 2nd quarter earnings. The question will be if the banks sense more pain ahead by stashing away more money for loan losses. According to FactSet data, the five biggest banks have stashed away $24 billion of loan-loss provisions for the first quarter. This will surely eat into profits as Wells Fargo warned it will likely cut its dividend for the first time since the Great Recession.
The XLF is still range bound with price struck in the middle.
But regarding JPM, if they sell off after earnings, I'm looking at putting on a bull put credit spread just below the 4 hr demand zone.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
