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The equal-weight gap

What the distance between an index and its equal-weight twin says about who is doing the work.

Take an index and strip out the weights: give every member the same vote and average their returns. That is the equal-weight version, and the gap between it and the real index is one of the most information-dense numbers in a session.

When the cap-weighted S&P 500 rises 0.72% and its equal-weight version rises 0.70%, the day's gain was democratic; the typical stock earned roughly the headline. When the index rises 0.72% and equal-weight is flat, the entire gain came from size: the biggest names went up and everyone else, on average, did nothing. Persistent gaps in one direction describe a market where leadership keeps narrowing or broadening, which matters more than any single day.

The equal-weight line answers the question a headline never does: was that the market, or was that five stocks? WMTMT draws it on every chart as the dashed overlay and states the gap in the daily notes.

Part of the WMTMT glossary · the daily notes apply these to every session