Take a break from S&P 500, try what S&P 100 is saying…

OEF and EQWL: S&P 100 ETF trackers, and why they matter

These two ETFs that personal the identical shares, however in very completely different weightings. First is OEF, a $21 billion ETF which has tracked that prime 100 shares by weight inside the S&P 500 because it debuted within the yr 2000. The OEF portfolio trades at 28x trailing 12-month earnings. And, as a enjoyable reality, the S&P 100 was once the preferred optionable index, for a very long time. These days, the S&P 500 is rather more liquid.

The weighted common market cap of OEF is $865 billion. Take into consideration that. 100 shares, almost $1 Trillion common dimension? It makes extra sense once we contemplate that even inside these 100 names, 7 firms make up 47% of the portfolio. The opposite 93 shares account for the opposite half. That’s concentrated. And it explains loads about why the market broadly has carried out properly. That’s the purple line above.

The orange line? That’s the very same 100 shares. However they’re equally weighted as of each rebalancing date for the Invesco S&P 100 Equal Weight ETF (EQWL).

How in style is EQWL? In comparison with OEF, it’s barely noticeable. EQWL has about $1.5 billion in property (lower than 1/10 that of OEF), and is in its eighteenth yr of existence. It sells at 21x trailing earnings, however for the reason that begin of 2020, it’s 35% behind OEF. You recognize, the identical shares, however weighted otherwise.

The technical charts for these two ETFs additionally present the issue right here, so let’s begin with these. Then, I’ll present a chart that clinches the argument for me, that the market is already breaking down. Even when the headlines don’t scream about it.

Right here’s OEF. To me, this seems to be similar to the S&P 500, which is smart given the thesis right here. It seems to be very toppy, however not tipping over.