What is the S&P MidCap 400 Index
The S&P MidCap 400 is a subset of the S&P 500 and serves as a barometer for the U.S. mid-cap equities sector. The S&P MidCap 400 is one of several leading Standard & Poor's indexes that investors look to for gauging the market performance and directional trends of U.S. equity securities. It is the most widely followed mid-cap index in existence.
BREAKING DOWN S&P MidCap 400 Index
The S&P MidCap 400 Index is a subset of the S&P 500 Index which includes the 500 largest equity stocks in the U.S. by market capitalization. Relatively, both the S&P 500 and S&P 400 represent a significant sample of the total market which is represented by the Wilshire 5000.
S&P 400 Composition
Similar to the S&P 500, market capitalization is also a distinguishing factor for the S&P MidCap 400 and its counterparts which include the S&P 100 Index, S&P 600 SmallCap Index and the S&P 1500. To be included in the S&P MidCap 400 Index a stock must have a total unadjusted market capitalization of $1.6 billion $6.8 billion. Stocks in this index represent household names from all major industries including energy, technology, healthcare, financial and manufacturing.
Like many other stock market indexes, the S&P 400 MidCap Index is a capitalization-weighted index, meaning that the stocks with the largest market capitalization have the most significant impact on the movement of the Index. Similarly, smaller movements in the smallest companies in the Index have virtually no effect on the overall movement of the Index. This is an important fact to remember for investors seeking diversification, as market-cap weighted index funds primarily expose an investor to the movements of a small group of stocks, despite the broad name of the index itself.
There are several exchange-traded funds (ETFs) that offer investors exposure to some or all of the S&P 400 MidCap Index. Two of the most popular ETFs include the SPDR S&P MidCap 400 ETF (MDY) and the iShares S&P U.S. MidCap Index ETF (IJH). These two ETFs allow investors to invest in a portfolio that includes all 400 stocks in the Index.
In technical analysis, traders may choose to chart the movement of the S&P 400 MidCap Index in similar ways as individual security analysis. Many traders may also choose to use the S&P 400 MidCap Index as an overlay on price series charts in order to provide directional insight in conjunction with technical indicators. In general, all types of indexes can be used to support technical analysis across a variety of market security categories.