Round Number Lesson?

Round number theory is affecting markets here. Sure this is a technology note, and the Nasdaq experienced issues with the 14000 figure in early to mid February (the 12000 number was a transitory roadblock between last September-November). But taking a look at the S&P 500, whose largest weighting is information technology at 27%, it is feeling the heat at the 4000 number here. Below is the chart of the S&P 500, and a ratio chart comparing it to the Nasdaq on the lower portion. The other incessant chat with the round figures, is the VIX at the 20 number. A sustained move below in the teens, where it was accustomed to trading in 2019 could give the markets a nice bounce. In 2019 every major S&P sector was positive, with the “worst” actor being energy up more than 11% (first time in prior 7 years all major S&P sectors were higher). On a separate note, keep in mind the reason why many fail to beat the S&P 500, is because the benchmark “holds” onto its winners (a few names are kicked out/added each year), where individual traders cut profitable trades too soon. Trade accordingly.

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