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S&P 500 Index Quotation Analysis

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Among the largest indices often followed by individual traders we find the S&P500 which we shall examine further in this article. On this page you will find a chart with the rates in real time of this index together with a historical analysis of its rate over the last ten years.  

Elements to consider before investing in this asset

Analysis N°1

Firstly, and entirely logically, we recommend you follow closely the performance of the assets that are included in this index. You do not of course need to follow all the 500 companies quoted, just the largest and most significant in terms of stock market capital which are therefore the most influential.

Analysis N°2

You should also commit yourself to closely monitoring the economic health of the United States. Several indicators are actually published every month, or even more frequently, that will enable you to follow this factor.  These include the unemployment rate, the trade balance, non-agricultural payments, the inflation rate, the GDP growth rate, retail sales, durable goods orders and industrial orders, commercial health and wellbeing and consumer confidence.

Analysis N°3

Announcements, meetings and decisions taken by the FED, or American Federal Reserve will of course exert an influence on the rate of this stock market index. You should therefore follow attentively the interest rates fixed by this entity or any related press conference.

Analysis N°4

Generally speaking, we also know that the value of the American dollar against other currencies on the Forex market play an important role regarding the profitability of companies in the United States. It is therefore important to monitor this indicator.

Analysis N°5

Finally, we would monitor the current general economic events of this country that could influence this asset.

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About the S&P500:

The S&P500, also called the SPX, is an American stock market index.  More precisely, as its name indicates, it is comprised of the 500 largest companies quoted on the stock markets in the United States. Its name also derives from the Standard & Poor’s Company, one of the three largest financial ratings agencies.

The S&P500 stock market index was created in 1950 and is currently recognised as the most representative index of the American stock markets, even above the Dow Jones. Composed of a large number of companies, it takes into account the stock market capital of each of the 500 American companies it includes and we can therefore find a wide range of activity sectors represented with the companies displaying the most positive growth from throughout America.


The largest companies included in the S&P500 stock market index:

To better understand the S&P500 stock market index we offer you the opportunity now to learn more about its composition. Of course we will not cite all the 500 companies here that are included in this index, simply the largest ones. It should however be remembered that this stock market index includes all the companies of the Dow Jones stock market index as well as another  470 major American companies.

The best known assets included in this stock market index are notably the share prices of the following companies; Apple, Oracle, Bank of America, Google, Qualcomm, Berkshire Hathaway, Wells Fargo, Citigroup, Kraft Foods, Microsoft, PepsiCo and Comcast.

Among these assets the largest companies are of course Google and Apple which are the principal components of the S&P500 stock market index given that their stock market prices are too high to be included in the Dow Jones.  These companies are of course heavily weighted but do not disrupt the S&P500 as they could the Dow Jones in relation to the significantly large composition of this primary index.


The activity sectors represented by the S&P500 index with their proportions:

Still with the aim of knowing more about the S&P500 stock market index we now offer you the opportunity to learn about the activity sectors represented in this index. To do so we have prepared a classification displaying the weight or size of each activity sector included, from the largest to the smallest.

Of course, this distribution is susceptible to change according to modifications in the composition of this stock market index and it is up to you to stay informed on these changes.


How are companies added or removed from the S&P500 stock market index?

Let us now go into the details a little further by explaining how a company may be considered for inclusion in the S&P500 stock market index. To be included in this index it is of course necessary that the stock market capital of a company makes it one of the largest 500 companies in the United States. But there are also other criteria that are taken into consideration for the admission of a company into the S&P500 index.

In fact, a company must have a stock market share capital of at least 4 billion dollars. It should also have a sufficient number of shares held by the public. As regards liquidity, the minimum quantity of transactions is 250,000 shares per month for a company to be considered.

A company that is included in the S&P500 needs to display a clear classification of its activity sector and prior to its inclusion must be quoted on the New York Stock Market or Nasdaq for a certain time period.

Finally, the last condition to be included in the S&P 500 relates to the financial responsibility of a company. In fact, each time that a company is included in this index we note a rise in its stock market share price. This is due to the fact that those responsible for the index funds generally proceed to buy shares in the company concerned in order to replicate the S&P500. Therefore it can be beneficial to adopt this particularity and take buying positions on these assets when they enter this index.


How is the rate calculated for the S&P500 index and how are the companies valued?

Let us now examine how the S&P 500 index is calculated. In fact, the method used to calculate this index is not the same as that used for the Dow Jones as here the value and position of each company is based on its general stock market capital.

Because of this particularity, the S&P500 stock market index does in fact better represent the global value of a company as it does not simply take into account the share price of a company. We also note that the weighing technique using the capital by this index is a floating technique as it doesn’t differentiate between the shares issued by this company and held by institutional and individual investors. Nor does it take into account shares held by the company itself or the governments.

Regarding the calculation of the S&P500 index rate, a divider is used that is determined by Standard and Poor’s. This actually combines the stock market capital of all the 500 companies in the index then divides the result by this number.

Of course, the divider changes occasionally. It is notably reviewed and modified up or down according to certain events such as the issue of shares, merger and acquisition operations, changes in the composition of the index and of course changes in the share prices too. These modifications are necessary to guarantee that the rate of this index is not modified by these events.


Key figures about the value over time of the S&P 500 stock market index:

Over the past few decades, the S&P 500 has experienced many highs and lows that are interesting to know if you are considering speculating on its price. For example, the S&P 500 reached a record high of 1,552.87 points in 2000 just before the bursting of the internet bubble. Immediately after, this index experienced a significant drop with a loss of more than 50% of its value and a fall to 768.63 points in 2001/2002.

In the course of the 2000s, the S&P index experienced a new price increase with a new record of 1,561.15 points in October 2007.  The financial crisis then led to a further decline with a 13-year low of 676.53 points in March 2009.

It is finally in 2013 that the S&P 500 index will rise again by more than 25% thanks in particular to QE3, a series of quantitative easing measures by the Fed and the printing of more than $85 billion monthly in purchases of mortgage-backed securities and Treasury bills. As a result of this monetary policy, the stock market value of this index has risen dramatically. As a result, in 2013, the S&P 500 Index reached an all-time high of 1,752.52 points.


How to effectively analyse the price of the S&P 500 stock market index?

In order to implement an effective trading strategy on the S&P 500 share price, you must first remember a few simple rules and know the most important information about it.

First, be aware that most S&P 500 futures contracts are only traded between 8:14 pm and 10:01 pm Monday through Friday. You should therefore focus on this time window for these analyses.

Let's also note another specificity of the S&P 500 index which fluctuates in increments of 0.25 points. You must therefore adjust your stock charts and their periodicity according to this fluctuation.

Most brokers or dealers who allow you to speculate on the S&P 500 require a minimum margin of 0.5% with a leverage of 30:1. In addition, the minimum trade size is 1 index.

Finally, note that the currency used to trade the S&P 500 is the U.S. dollar.

As for the strategies to implement on this type of index, you can rely largely on the technical analysis that is used by the majority of investors on this value. But of course, you should also closely monitor the market capitalizations of the companies that make up the index and the elements that influence it. In this way, you can best anticipate future changes in each stock and in the S&P Index as a whole.

Finally, keep in mind that certain important events, such as the entry or exit of a company from this index, will have a significant influence on its price, as will events that have a direct effect on the financial health of one of the sectors represented in this index.

Frequently Asked Questions

How do I invest in the S&P 500 Index?

In order to invest in the S&P 500 stock index, it is necessary to use derivatives as it is not an asset that can be bought or sold. In fact, there are two ways to trade this stock index, either by using an ETF or the CFDs or contracts for difference that are offered by online brokers in the market and that replicate the performance of this index.

What factors influence the performance of the S&P 500?

The factors that influence the price of the S&P 500 are of course economic factors relating to the US economy. Indeed, the data on the GDP or the sales of the country will most of the time reflect the evolutions of this index. But it is also possible to follow the news of the largest capitalisations in this index, which is however more laborious, or other factors such as the rate of the dollar or the decisions of the Fed.

How do you do a technical analysis of the S&P 500?

To perform a technical analysis of the S&P 500, you need to use the right online charts with customisable charts such as those offered by online brokers. You can then display several trend or volatility indicators such as moving averages, MACD, Bollinger Bands, Stochastic or RSI and support and resistance levels.

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