Index trading is relatively less risky/volatile and more predictable than individual stocks and thus ideal for beginner traders. Indices are more prone to macroeconomic news/development, the central bank/fiscal policy. In simple words, a blue-chip index such as Dow Jones Industrial Average (DJ-30) is the ‘king’, and most of the day individual stocks follow the benchmark index even after some divergence due to any stock-specific news. Another correlation between stocks and indices is that an index heavyweight stock like Boeing may also affect the benchmark index such as DJ-30.
Dow Jones Industrial Average (DJ-30):
The Dow Jones Industrial Average, popularly known as Dow is a U.S. index of 30-blue chip stocks. Dow is the most popular/followed index in the global capital market and is a price-weighted index among various sectors of the economy:
Consumer discretionary: Nike, Home Depot, and McDonald’s
Consumer staples: Coca-Cola, Walmart, P&G, and Walgreens Boots Alliance
Communication services: Verizon
Financials: American Express, Goldman Sachs (GS), and JPMorgan Chase (JPM)
Healthcare: Amgen, J&J, Merck & Co, and United Health
Industrials: Industrial sector has significant weightage in Dow. Some of the blue-chip industrials are Boeing, 3M, Honeywell, and Caterpillar.
Basic Materials: Dow Inc.
Technology: Apple, Cisco, IBM, Intel, Microsoft, and Salesforce
Dow made a new lifetime high around 35268.44 on 10th Aug’21 amid bipartisan infra stimulus for around $1T optimism. But looking ahead, COVID Delta spikes and earlier than expected QE tapering by Fed may also affect the overall market (Dow). Technically, the immediate target of Dow maybe around 35550 and 41000 by Dec’22.
S&P-500 (SPX-500): Standard and Poor’s 500 is a stock market index that tracks 500 large caps and is one of the most commonly followed equity indices in the world. The S&P 500 index is a free-float weighted/capitalization-weighted index and the 10 largest scrips in the index account for more than 26% weightage of the market capitalization in the index are Apple, Microsoft, Amazon, Facebook, Alphabet (Google parent), Tesla, Berkshire Hathaway, JPM, and J&J. The SPX-500 is a domestic savvy index as almost 72% of the revenue comes from domestic operations.
Communication services: Alphabet (Google parent), AT&T, Comcast, Discovery, Dish Network, FaceBook, Fox, Netflix, T-Mobile, Twitter, Verizon, Viacom, Walt Disney are some of the big names.
Consumer discretionary: Amazon, eBay (online retail), Advance Auto Parts (automotive retail/automobile parts), Best Buy (computer & electronics retail), Caesars Entertainment (Casinos & gaming), Carnival Corporation, Marriott International (hotel, resorts, and cruise lines/travel & tourism), Chipotle Mexican Grill, Domino’s Pizza, McDonald’s, Starbucks (Restaurants/QSR-Quick Service Restaurant), D.R. Horton (homebuilding), Dollar General, Dollar Tree, Target (General Merchandise Stores), Ford, GM, Tesla (automobile manufacturers), Gap (apparel retail), Hanesbrabs, L Brands, Nike (apparel, accessories & luxury goods), Home Depot, Lowe’s (home improvement retail), Whirlpool (household appliances/consumer durables), etc.
Consumer staples: Coca-Cola, Colgate, Kellogg’s, Kraft Heinz, Kroger, PepsiCo, P&G, Tyson Foods, Walmart, Walgreens Boots Alliance, and Philip Morris.
Energy: Chevron, BP, ExxonMobil, ConocoPhillips, and Baker Hughes (oil & gas equipment and services).
Financials: American Express, AIG, Bank of America (BOA), Berkshire Hathway, BlackRock, Citigroup, Goldman Sachs (GS), JPMorgan Chase (JPM), Moody’s, Nasdaq, S&P Global, and Wells Fargo (WFC).
Healthcare: Abbott Labs, Biogen, Baxter International, Becton Dickson, J&J, Eli Lily, Merck & Co, Moderna, Pfizer, Regeneron, and United Health.
Industrials: 3M, Caterpillar, Boeing, and United Airlines, etc.
Materials: Dow, DuPont, Newmont (Gold), and Nucor (steel).
Real Estate: American Tower, CBRE, and Equinix, etc.
Technology: Accenture, AMD, Apple, Broadcom, Cisco, HP, Intel, IBM, Intuit, Mastercard, Micron, Microsoft, Nvidia, Oracle, PayPal, Qualcomm, Visa, Western Digital, and Zoom.
Utilities: American Electric Power, CMS Energy, and PG&E.
S&P-500 made a lifetime high around 4445.60 on 10th Aug’21. Looking ahead, technically immediate target for SPX-500 may be around 4480 and 5025 by Dec’22.
The Nasdaq-100 is an equity index made up of 102 stocks issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange and a modified capitalization-weighted index. NDX (NQ-100) consists of non-U.S. companies like SPX-500, while DJ-30 has only U.S. companies. NQ-100 consists of communication services, consumer discretionary, consumer staples, healthcare, industrials, technology, and some utility companies; it’s a tech-heavy index. Some of the big names are Accenture, AMD, Apple, Broadcom, Cisco, HP, Intel, IBM, Intuit, Mastercard, Micron, Microsoft, Nvidia, Oracle, PayPal, Qualcomm, Visa, Western Digital and Zoom. Tech is a part of post-COVID ‘K’-shaped economic recovery amid digital/WFH theme (COVID lockdown). But the sector may continue to flourish even after COVID and digital adaptation improves productivity, which is the ultimate.
NQ-100 made a lifetime high around 15183.90 on 5th Aug’21. Looking ahead, technically, the immediate target for NQ-100 may be around 15400 and 17600 by Dec’22.