In 2016, a technical signal told me the stock market was going to keep rallying — and it did. The S&P 500 Index climbed about 30% from February through the end of the year.
Now that same signal is flashing the rally sign again.
See, the “regular” S&P 500 is a cap-weighted basket of 500 of the largest companies trading in U.S. stock markets. Cap weighting — or capitalization weighting — means the larger companies carry a higher percentage of weight. So the fund’s performance is driven by these big companies.
However, you could also equal-weight the S&P 500. Equal weight means every stock has the same weight in the index — 0.2%. Big stocks and smaller stocks are treated equally. So you end up owning more of the smaller-cap stocks — and the performance is driven by those companies.
Take a look at 2016’s performance yourself:
Generally speaking, when the equal-weighted version of the S&P 500 (the blue dotted line) outperforms the regular version (the green line) … it signals that the overall stock market is setting up for a run higher.
As you can see in the chart above, that was the case from about March 2016 until the end of the year.
And right now I see the same pattern setting up again: The equal-weighted exchange-traded fund is getting ready to outperform the regular version.
That means most stocks are setting up to surge higher in the next few weeks.
With that in mind, I urge you not to wait on the sidelines. If you’re worried you’ve missed out on the postelection rally that’s been roaring since November, you haven’t.
In fact, this signal is one of the reasons why my Profits Unlimited readers are raking it in. Their profit in just one of our stocks is up to 160%. So if you’re the kind of investor who likes to grab gains like these ahead of the rest of Wall Street, consider joining the 60,000-plus members of Profits Unlimited.
Editor, Profits Unlimited