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The three most popular indices in the media are the Dow Jones, the S&P 500 and the Nasdaq.
(DIA) The Dow:
Made up of only 30 different companies. It is Price-Weighted meaning the companies are weighted in the index by their share price. If they have a higher share price, they account for a larger percent of the index, thus their fluctuations have a larger impact on the overall index price. Investopedia
The Top 10 Companies by weight, as of TD Ameritrade, are currently: UNH, GS, MSFT, HD, MCD, AMGN, CAT, V, CRM, HON. All Companies
Since it is made up of so few companies, it isn't considered a great gauge for the market in my opinion.
(SPY) The S&P 500:
Is made up of 500 different companies throughout many different sectors.
It is a Market-Cap weighted ETF meaning companies with higher market caps carry a heavier weight and influence on the index price.
The top 10 Companies by weight as of TD Ameritrade, are currently: AAPL, MSFT, GOOGL, AMZN, TSLA, NVDA, BRK.B, FB, UNH. All Companies
Since it is such a large index - it is a very accurate picture of the health of the entire market. Consisting of many different sectors. Including but not limited to, Energy, Technology, Finance and more.
(QQQ) The Nasdaq-100:
The Nasdaq-100 is a Market-Cap weighted index of 100 of the biggest publicly traded Tech Companies.
The Top 10 Companies by weight, as of TD Ameritrade, are currently: AAPL, MSFT, GOOGL, AMZN, TSLA, NVDA, FB, AVGO, COST. All Companies
If you want to know what all of the strongest tech stocks are doing, look no further than the QQQ.
In my opinion, the best way to figure out what the market is doing, as a whole, is to watch the SPY and the QQQ. I tend to watch both indexes at all times. As both of them are equally important and give hints and clues to different aspects of the market. When QQQ comes to a major support, usually the SPY will too, same with resistances. Their price action is very similar. Oftentimes, when the QQQ creates a low of the day and bounces, or hits a resistance, many other stocks like AMZN, AAPL, NVDA & TSLA will as well, at almost the same time.
If you trade, invest, or have any interest in the market, I highly recommend following the SPY and the QQQ.
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