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Strategies & Market Trends : Technical analysis for shorts & longs

SPY 692.27

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Jan 15 4:00 PM EST

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To: dppl who wrote (9671)	11/15/1996 12:14:00 AM
From: j g cordes	of 69798

Thomas, you're absolutely right.. re. earnings/interest rates correlation to DOW price. The # of points, of course, wouldn't be a constant 250 but scale. The construction of the DOW has changed over time, or one should say the divisor has. In 1962 the divisor was 3.09, in February '66 it was 2.24, in March '96 it was .345 and now its less than that. In essense its become a multiplier (not the leatherman tool!). When a dow stock splits, the divisor is adjusted down. Anyway, the interest rate effect with the divisor effect has exagerated DOW moves and its assent to where the number is out of proportion to what's going on with the stocks themselves (unless of course you've owned them since the silent films). As heavily weighted components of other averages split, it will have the same effect. Bank charts look like they are saying interest rate targets have been met "short" term, I know mine have. Jim

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