What Happened This Week?

JC Parets
August 20, 2021

The buyers stepped up when they had to.

This could have been disaster for the Stock Market, but instead it's just more of the same: A Hot Hot Mess.

I think a great way to explain what happened this week is with the Equally-weighted S&P500. Remember, this version of the index is not heavily weighted towards those monster companies.

This index gives an equal weighting to each of the components:

After this one peaked in May, it then made no progress for 3 months.

The question coming into the week was whether this was a failed breakout or something real.

The kick save the past couple of days reiterates just how critical it is for this index to hold these levels.

Remember, in the traditional Cap-weighted S&P500, only 5 stocks represent over 20% of the entire index: Apple, Amazon, Google, Microsoft and Facebook.

But for this one, it takes those massive market caps out of the equation.

Moving forward, if $RSP loses all those former highs then this market is probably in a lot more trouble.

But so far, the weight-of-the-evidence continues to suggest that this is more of a messy situation than the early stages of a complete stock market collapse.

We're just not seeing that yet. A break below this week's lows would really question the current market structure.

It's the end of August, so let's not pretend it's not. More chop over the next few weeks makes a lot of sense.

You can catch up here on where we are in the cycle and which stocks we're buying (and shorting) to take advantage of it.

Let me know if you have any questions!

JC

 

 

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