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From: Doren5/7/2020 5:51:40 PM
2 Recommendations   of 209886
 
Question for Henry: The SPX seems to be pretty important to your TA.

I was just reading this article, and I was wondering what you might think of how it would effect SPX charts if less successful companies drop off of it because they no longer meet market cap minimums or profit minimums:

Opinion: Everything you know about growth and value stocks is about to flip

The cogent part is in the second half of the article which I've copied and pasted below. He mostly talks about the mid and small cap indexes but I'm assuming the SPX also has minimums.

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Running out of stocks for S&P indicesWreaking havoc on traditional quant investing is just one of the under appreciated ripple effects of the coronavirus on the stock market. Another, according to Houssels, will be to reduce the pool of stocks eligible to be included in the various S&P indices.

That’s because Standard & Poor’s has market-cap minimums for inclusion in its S&P MidCap 400 and S&P 600 Small Cap benchmarks. They also require that companies not have negative earnings over the trailing 12 months, and that earnings in the most recent quarter be positive. As of mid-April, according to Houssels, 39% of the companies in the S&P MidCap 400 index were below the market-cap minimum, and 41% of the companies in the S&P Small Cap 600 index.

Once companies’ earnings reflect the impact of the pandemic, many of them will fail the negative earnings criteria. One scary data point in this regard comes from Vincent Deluard, Global Macro Strategist at INTL FCStone: He reports that 40% of the small- and midcap companies in the Russell 2000 index RUT, +1.57% don’t have enough net cash to cover even one month of expenses.

Not only will this reduce the number of companies eligible to be included in the S&P indices, it may lead to an outright reduction in the total number of publicly-traded companies. That’s because, Deluard argues, the cash-rich “tech mega caps” (Microsoft, Google, Apple, Facebook, Amazon, Oracle, and Cisco) should be able to “simply ‘name its price’ and buy any company they like.”

This would represent the acceleration of the “Winner Take All” trend I wrote about two months ago. In that column, I pointed out that an increasingly large percentage of corporate profits are accruing to a smaller and smaller group of companies. One consequence is a shrinkage in the number of publicly-traded companies. Right now, for example, the Wilshire 5000 index contains fewer than 4,000 stocks (only slightly more than half the number it contained in the late 1990s).

Up until now, the S&P 1500 index (along with its sub-indexes — the S&P 500, the S&P Small Cap 600, and the S&P MidCap 400) has not been affected by this shrinkage. But one side effect of the coronavirus pandemic is that even these indices will be affected.

The bottom line: A huge boulder has been dropped into the investment world’s ocean, and it will take a long time for the ripple effects to subside. A good rule of thumb for now and well into the future is: “Take nothing for granted” when it comes to your tried and true valuation metrics and market indicators.

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To: Doren who wrote (209800)5/8/2020 12:17:09 PM
From: Henry J Costanzo
2 Recommendations   of 209886
 
Some good questions raised there...questions which I have also asked myself over the years.

I have concluded that the best, most fully representative, index is the Wilshire 5000..Problem with tracking that, however, is the fact very few people do so, compared with the many who track the SPX500..
And the latter is an excellent proxy for the Wilshire...the respective charts show almost identical patterns.

On balance, therefore, I would still much prefer to stick with the very well known and widely tracked SPX...

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From: Henry J Costanzo5/8/2020 10:06:44 PM
   of 209886
 
FYI AAPL..

Message 32724914

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From: Henry J Costanzo5/9/2020 10:11:28 PM
3 Recommendations   of 209886
 
$SPX update:

I had thought that the rare Fan Principle corrective pattern might be forming, but that was not so..

Some modest advance was seen, and that was enough to bring about a second bullish pennant breakout since early Apr..enough to now activate another measured move towards 3225ish...

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To: Henry J Costanzo who wrote (209803)5/10/2020 1:27:34 AM
From: humble1
1 Recommendation   of 209886
 
This is excellent work. Been watching the exact same thing meself. The 2nd pennant ended right on a full moon. The ensuing gapper upper on 5/8 is perfect and the strong futures close is ideal as is the sentiment background:


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To: Henry J Costanzo who wrote (209803)5/16/2020 11:58:22 AM
From: MT
   of 209886
 
beautiful...watch the sky mi amico....love you brother mT

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From: Henry J Costanzo5/17/2020 3:35:23 PM
3 Recommendations   of 209886
 
Not unexpected to see both the Index and its weightiest single issue track each other rather closely within the recent volatility stemming from the unpredictable COV-19 exogenous catalyst.

I'd look for a continuing hold above their current uptrend support areas from Mar and Apr lows....and extensions towards their activated measured moves at 3224ish and 305ish....

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To: Henry J Costanzo who wrote (209806)5/22/2020 7:03:49 PM
From: da_spot
10 Recommendations   of 209886
 
Dear Henry,

Thank you for all your work and continuing effort over the years.

I sincerely hope that you have a wonderful long weekend and wish you


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From: Henry J Costanzo5/25/2020 11:05:53 AM
3 Recommendations   of 209886
 
SPX update:

Charts of SPX and of major leading issues continue to show the considerable correlation mentioned earlier...thus suggesting completion/confirmation last week of another bullish pennant formation measurable to 3225ish.

Coming week should find horizontal support area at 2875ish and uptrend support area at 2850-2825ish, while facing an overhead resistance area around the aforementioned 3225ish..

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From: Henry J Costanzo5/29/2020 9:53:20 PM
   of 209886
 
FYI AAPL Update:

Message 32759032

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