Howdy folks.
I’m still teaching over in Florida with Tom Busby this week, but I wanted to share what’s on my radar today because it’s shaping up to be an interesting month in the markets.
First off, let’s talk about the S&P 500.
Watching the 3-Day Range
Right now, the three-day high and low in the S&P 500 are 6068.25 and 5874.75. That’s a 193.50-point range. These two numbers are key levels to keep an eye on for the month ahead.
But here’s the thing — this range might not be the full story.
By tomorrow’s close, we’ll have the first five trading days of the year behind us. For me, that five-day range is usually more significant than just the first three days.
It sets the tone for January and, in many cases, for the rest of the year.
Tech Stocks Shine Amid U.S.-China Tensions
Yesterday, we saw tech stocks do well, but it wasn’t without some controversy. The U.S. blacklisted Tencent, a major Chinese tech company, and that had ripple effects.
The big takeaway? The top 10 stocks in the S&P 500 now control a whopping 40% of the index. That leaves the other 490 stocks to make up the remaining 60%.
Think about that for a second.
When you’ve got this kind of concentration, the index can start to look a little… misleading. A handful of big names can sway the entire thing, even if most of the other stocks aren’t moving much.
Rebalancing Ahead?
This isn’t the first time we’ve seen something like this. The Nasdaq has had to rebalance in the past when its top stocks got too dominant, and maybe it’s time for the S&P to follow suit.
Why does this matter?
If the S&P doesn’t rebalance, we might see price moves that don’t truly reflect the overall market’s health.
For traders, that means you need to dig a little deeper — don’t just look at the index and assume it’s telling the whole story.
My Takeaway
For now, keep those three-day highs and lows on your radar, and in a couple of days, we can add the first five-day range to the mix. Those levels can give us a clearer picture of where the market might go next.
And remember, with so much weight on the top 10 stocks, the S&P might not be as straightforward as it seems. It’s more important than ever to focus on the details and look beyond the headlines.
Let’s see how the rest of the week shapes up.
— Geof Smith
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