Donald; RE:" DJX.X = Ÿ(CEX.X) ? "
One of the things that I have been enjoying these last few weeks, as I have been learning more and more about various indices, is looking up their components and making little index portfolios over on Yahoo, listing these stocks by their weights. The CEX.X S&P Chemicals Index breaks down like this...
34.72 = DD
13.00 = MTC
11.36 = DOW
5.02 = PPG
4.26 = APD
3.38 = PX
2.89 = ROH
2.84 = UK
2.65 = IFF
2.65 = GRA
2.40 = EMN
2.39 = MII
1.79 = SIAL
1.64 = ECL
1.39 = FMC
1.34 = GLK
1.33 = EC
1.33 = NLC
1.21 = GR
...I know that you already know this, Donald - I'm listing these for anyone else following our conversation.
So CEX.X is heavily weighted by DD, MTC and DOW. I had a little short running on DOW ( look at the candlesticks from several sessions back and you'll see the big Doji Evening Star that triggered my trade). But not unlike the SOX.X, which is heavily weighted by INTC, this index is really all DuPont and Monsanto - driven. As Tom mentioned earlier, to play an index might not be as profitable as choosing some component(s) and using traditional PUTs and CALLs on them. In this case, both DD and MTC are showing us bearish reversal candlesticks (Monsanto just made a textbook Evening Star). Like a regression equation with coefficients,
CEX.X = 34*DD + 13*MTC + 11*DOW +...
But then, DD and MTC are OEX-100 components, too; And the CEX.X chart is highly correlated to the OEX, SPX and INDU (same UpTrend). I think where I'm going is - after awhile I will have several of these index-portfolios constructed, and I will be able to observe, for example: XMI.X = SOX.X + CEX.X +... how the sector indices make up the Major Market Index.
I wish I had begun my stock trading/investing (many moons ago) by starting off with the indices, Donald. I feel as if I am learning some fundamental assembly language of the stock market by doing so today.
-Steve |
