Equally-weighted Indexes Back to 2021 Highs

February 20, 2024

And we're back...

The new all-time highs in the S&P500 and Nasdaq100 earlier this month have been well documented.

What they don't tell you is that the equally-weighted versions of those market-cap weighted indexes are just now getting back to their late 2021 highs.

They never even broke out. In fact, they're finally just getting back to where they started.

We discussed this yesterday and what we're doing about it. I highly encourage you to watch yesterday's Emergency State of the Markets Livestream.

Here's the S&P500 Equally-weighted Index running into those former highs:

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You have the exact same situation in the equally-weighted Nasdaq100.

Obviously the Nasdaq100 $QQQ has gone on to make new all-time highs over the past month.

But the equally-weighted version is now just getting back to where it started:

Do you think these indexes are going to break right through those former highs like if there was no resistance there at all?

Or do you think the market will acknowledge those former levels?

For a clue, here's the Nasdaq100 Index (market-cap weighted) making new highs in early February, although only briefly.

Meanwhile Momentum has been putting in lower highs along the way.

This is exactly what we normally see before a swift sell-off. The kids these days might even call it, "a rug pull".

So what could save this market?

Who is the Batman of this Gotham City?

I think it has to be the US Dollar.

The bullish case for stocks right now, in my opinion, has to begin with the US Dollar rolling over.

One could argue that the market has been "resilient", during these 7 straight weeks of gains for US Dollar Index Futures.

I think resilient is a bit of a stretch, considering how poorly the individual stocks have done during this period, but one can point to the indexes hanging in their ok.

Fine.

But either way, whether resilient or not, if the US Dollar rolls over here at exactly the 61.8% retracement of the entire 4th quarter decline, that would be the most bullish catalyst for stocks that I see out there right now.

It's not the high probability outcome, in my opinion, but I'm open minded to all possibilities.

Now, if you flip that on its head, and the Dollar breaks out from here, I would expect stocks to be selling off violently.

I'm betting on the latter.

How about you?

Feel free to chime in here and let us know what you think!

And don't forget to register for Wednesday's LIVE Technical Analysis Bootcamp. There are still a few spots left.

See you there!