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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 692.24+0.3%Jan 15 4:00 PM EST
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To: HairBall who wrote (66955)1/16/2001 2:39:19 PM
From: John  Read Replies (2) of 99985
 
Hi LG,

I think a more accurate, although very painstaking, way to calculate the theoretical "Max Pain" for the NASDAQ 100 would be to calculate the "Max Pain" for each of its respective components, and then derive the "Max Pain" value of the NASDAQ 100 index based upon the prescribed weightings of each security within the index. Merely calculating a "Max Pain" value for QQQ would likely yield a non-predictive result, mathematically. I assert this because QQQ only follows the path of the aggregate direction of its components, thus a "Max Pain" value for QQQ based strictly on QQQ, in and of itself, would not be expected to be coterminous with "Max Pain" based on the separately computed respective components of the NASDAQ 100.

Regards,
John
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