The chart of the equal-weighted S&P 500 $RSP relative to the market-cap-weighted S&P 500 $SPY can provide valuable insights.
It gives us a read on future leadership trends and helps guide how we position ourselves in various vehicles and themes.
The SPY is dominated by mega-cap tech stocks, while RSP, with its equal-weight structure, provides a broader market picture with greater exposure to cyclical sectors like Industrials, Materials, and Financials.
The RSP/SPY ratio is currently testing a key support level that was last seen during the Great Financial Crisis. If it holds, it could mark the start of a shift from mega-cap dominance to an environment where we want to look down the cap scale a bit more.
A bounce here could signal rotation into cyclicals, while a breakdown would suggest continued mega-cap leadership and a concentrated market posture.
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