— Drew Wells, CMT, CIMA® (@DrewTheCharts) August 5, 2020
Today’s Chart of the Day was shared on Twitter by Drew Wells (@DrewTheCharts). There’s been a lot of concern over market breadth lately. Many warn that the S&P 500 has become saturated to a handful of Mega-Cap stocks, namely, $AAPL, $MSFT, $AMZN, $FB, $GOOG. Drew offers a somewhat contrarian take on breadth here. He points out that equal-weight S&P 500 ($RSP) is slightly outperforming cap-weight S&P 500 ($SPY) since the March 23rd low. Equal-weight ($RSP) is up about 51.83%, while cap-weight ($SPY) is up 49.50%. To be fair, equal-weight is still below its June high. However, the fact that equal-weight has continuously led off of a major cyclical low is constructive. It suggests that breadth and Mega-Cap tech leadership isn’t as unhealthy as some think. Further outperformance from equal-weight would be bullish, as it would be evidence of broadening participation.