S&P500 (SPY) : 2600 pts is key

SPDR S&P 500 (SPY) - 11/12/2018

Short Term strategy: Negative (10%) / Trend -
Long Term strategy: Neutral (50%) / Trend -

Characteristics of the ETF

The SPY ETF (SPDR) created in 01/1993 replicates the S & P 500 index, which is composed of the 500 main US stocks representative of the main sectors, while the stocks are selected according to the size of their market capitalization.

The ETF fees are quite low at 0.0945% and the AUM is $ 247bn. Replication is direct (physical) and there is a dividend distribution policy on a quarterly basis.

Alternative ETFs: AUM5 (Amundi in Euro), SP5 (Lyxor in Euro), IVV (iShares, in USD)

Index & components

The top 10 stocks of the S & P500 include five major technology stocks (Apple, Amazon, Microsoft, Alphabet and Facebook), but also larger, more classic and iconic American companies such as JP Morgan or Exxon Mobil.

The main benefit of this index is its depth, which allows it to be a good proxy for the US economy, with a sector weighting that favors the growth sectors a little more, just like the technology stocks that represent about 20% of the weighting. Financials account for just under 13% of the index, and energy values ​​of 6% are well balanced by defensive sectors such as health (about 15%) and consumer discretionary (10%).

The index has benefited from a strong momentum since the election of D. Trump, at the end of 2016, while alongside the technology that remains the engine of the US market, new sectors have joined the trend, however a correction is now underway on the index because of fears of trade war and a return of inflation following the program of lower taxes for US businesses and households that should have a positive impact on growth, while announced deregulation on shale oil and banks could also benefit these sectors.

However the multiples of the S & P 500 are currently quite high, even after the correction, at around 17x results at 12 months, which is in the middle of the range (historically between 15 and 20x) but near the end of the cycle, even if it must American economy growth estimated at around 3,5% in 2018. The whole question is now about the duration of the US cycle in a context of rising rates which is still progressive for the moment while the level of margins is at its highest level and appears to have lost much upside potential, even though the consensus again is for a sustained growth of earnings in 2019.

Latest developments

After rising 19.4% in 2017 fairly linear, the index is now down about 1% since the beginning of the year while investors doubt the truce of the trade war between China and the US after the arrest of a Huawei leader and also consider the end of the growth cycle of the US economy which is manifested by an ever weaker spread between the 2-year and 10-year rates, after a sharp decline in 10Y interest rates since a few weeks, as well as increasingly weak statistics on the construction market.

The drop in oil prices should have a slightly positive impact on consumption, but the big unknown is the GAFA's behavior in a context of weaker growth or even a recession.

Weekly data

The weekly chart shows that the EMA100 test did take place, which triggered a bullish reaction on the index in the form of a hammer that needs to be confirmed. However the resistance has been broken, which weakens it for a possible new bearish attack. The oscillators remain negatively oriented without any particular sign of reversal.

Daily data

On the daily chart, onecan see the hammer, a bullish figure that should be followed by a rise in the index toward the short term moving averages. The 2600 pts level  is key, because it is the major resistance of the index, which in case of bearish breakout would open a significant bearish potential to 2400 pts. Short- and medium-term moving averages remain downward and constitute an obstacle to the continuation of the short-term rebound.


SPY is an ETF, listed in USD, which seeks to replicate the S&P500 index (505 US companies)


Inception date 22/01/1993
Expense ratio 0.09%
Benchmark S&P 500
Issuer SPDR
Ticker SPY
ISIN US78462F1030
Currency $
Exchange NYSE Arca
Assets Under Management 247 327 M$
Replication Method Direct (Physical)
Dividend distribution
Currency risk No
Number of Holdings 505
Risk 3/5

Country Breakdown

USA 100%

Sector Breakdown

Information technology 20%
Health Care 16%
Financials 13%
Consumer discretionary 10%
Communication services 10%
Industrials 9%
Consumer Staples 8%
Others 14%

Top Ten Holdings

Microsoft  4%
Apple 3%
Alphabet 3%
Amazon 3%
Johnson & Johnson 2%
JPMorgan Chase 2%
Berkshire Hathaway 2%
Facebook 1%
Exxon Mobil 1%