Most traders and investors don't realize that the U.S. stock market is capitalization-weighted.
That means names with bigger market caps carry greater percentage weights in the index, and vice versa for stocks with smaller market caps.
So despite the fact that the S&P 500 and Nasdaq 100 are home to 500 and 100 stocks, respectively, the bigger a stock is, the more voting power or control it has over the broader market.
That's why it's important for us to watch both market externals and internals.... |
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