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Strategies & Market Trends : Waiting for the big Kahuna
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To: Spots who wrote (12855)1/9/1998 11:24:00 AM
From: James F. Hopkins  Read Replies (1) of 94695
 
Spots; RE >they contain equal shares of each stock so the higher priced stocks account for more of the index value percentagewise than the lower priced ones.<<
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I see here what your saying, and that is true..Just keep in
mind that because GE say has more " VALUE" in the index than
a lower priced one" IT does not "move the index" any more
with a dollar swing in its price than any other one.
In essence how much dollor value the stock has , is not relitive
to what the index does, because of the "equal" amount of
shares. Worse yet, Stocks with fewer shares outstanding..
also can swing the index just as much as thoes with 100 times more
shares outstanding, this tosses a real cruve at you as to what
the market is doing. ( like the most widely held stocks in the
index held captive to the thinly held issues, or say the index
is held captive to that and can be very missleading about what the Bigger picture, and the major market is doing.
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It causes me heartburn to see how CNBC and so many news people
focas peoples attention on the DJI and teach them to think
it fairly represents the over all market at any given time,
very few things I can think of are futher from the truth.
Jim

Jim
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