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August 29, 2005
Broad Market Support
The S&P 500 Equal Weight Index (RSP) is as good a representation of the broader market as any. It treats all S&P 500 stocks equally, regardless of market capitalization. Therefore General Electric ($3.35 billion) counts the same as Perkin Elmer ($2.53 billion).
I use this index to tell me where the broad market is heading. RSP recorded a new all time high in early August and remains in a long-term uptrend. The current decline looks like a falling flag, but is still falling and support is a couple points away. As with the Nasdaq, I am looking at key retracements, prior consolidations, trendlines and moving averages. This puts a support zone around 155-159 and I would expect the index to firm in this area. A move below the bottom of the support zone (say 154) would be deemed excessive and reverse the current uptrend.
Posted by Arthur B. Hill at August 29, 2005 07:25 AM