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Strategies & Market Trends : Fidelity Select Sector funds

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To: Jim Battaglia who wrote (3245)	12/30/2000 3:31:34 PM
From: James F. Hopkins	Read Replies (1) of 4916

Jim ; Thanx; & I'm going back to something I use to watch a few years ago ( the DOW 30 ) what I did back then was keep an eye on how the DOW moved via it's Price weighted method, compared to how it would have moved to a Market cap weighted one. As when I found that $1 move in the lesser stocks such as IP could "move the index" just as much as a $1 move in GE..and that if a number of the lesser cap stocks caused the index to go UP much more than the greater cap stocks it would correct. On the other hand if the major caps lifted the index it wouldn't be long that the smaller ones kicked in and would send it even higher. I called it a liquidity factor. ------------- I stopped tracking the DOW internals when the QQQ cranked up and focused on the NDX. --------- Well with the NDX down so much and he Dow only down 6.2% for the year I thought I'd take a look at the DOW internals. So far I haven't finished but by eye it's already shaping up very scary. ------------- This time I'm adding a new twist..instead of market cap which can also mask the true nature of what's going on I'm looking directly at the amount of shares each issue has outstanding. ( while it can be argued that I should use the Float instead , and I almost did ) I feel the outstanding shares will be OK , as by proxy investors are hooked into that number anyway even if the difference is not trading) -------------- By using a round percentage of yr gain or loss of each issue , I can represent the Outstanding shares of each issue as $1 to get a relative gain/loss to how investors are positioned. -------------- I can tell you before I finish, the way investors are positioned via the amount of shares they could own that there is a much larger loss in the real percentage of assets value than the 6.2% down that the Dow shows. It looks so horrible I doubt people are going to believe it. -------------- Take MO the biggest gainer up 110% with 2.22Billion shares if each share was to represent a $1 that's a relative asset gain of 2.44B On a relative basis MSFT with it's 63% loss and 5.33B shares has lost 3.65 B.. Here you can see how investors can be fooled by indexes While MSFT is down much less than MO is up.. it's costing more people more money than MO is giving people..yet just between those two MO will have the INDEX up via a price weighted one if these were the only two stocks in the index it would be up but by market cap it would be down 21.7% ------------------ BUT by outstanding shares 2.22+5.53=7.75 with a net loss of 3.65-2.44=1.12B / 7.55b = 14.8% loss to an investor who owned all the shares of each stock. ---------------- While the DOW looks scary, ( by eye ) I have a paper portfolio set up of the Largest cap stocks in the OEX and by market cap weighting they are down more than they are when weighted by outstanding shares. In that respect the average investor in the Largest Cap stocks is not doing as bad as the OEX index looks. ( 3.5% better,) and that while still bad that takes away from some of the scary part. ------------------ My thoughts are when a Share Outstanding weighted index ( the only honest type ) is up over a period of time it takes to trade over 50% of the shares in it, then most investors are seeing real gains and will start to pour into the market. As long as a share weighted one stays negative they will sell at resistance levels. Jim PS I'm not real bright or fast at coming up with ideas but my pedagogue says I have the best "rat trap type mind" he has ever seen.

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