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Strategies & Market Trends : Technical analysis for shorts & longs
SPY 683.47+0.6%Nov 28 4:00 PM EST
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To: j g cordes who wrote (16131)6/4/1998 6:36:00 PM
From: Lachesis Atropos  Read Replies (1) of 68426
 
Jim "Lachesis, I'd like to go back to something we previously discussed"
"...Uncanny, but their seems to be a correlation of trends by sector; however, I am still skeptical." By this, did you think there wouldn't be?
My comment was made when I was looking at the Internet Providers sector. When I looked at them they were very similar. However, the TA you directed me to on www.market.watch noted a divergence in sectors and stated that a market with such behavior is not healthily. They also made the observation of a head and shoulders formation in the Russell 2000. So, my inconclusive conclusion is that in a healthy market, stocks by sectors may have a strong correlation but that is a hard mathematical proof.

What I did find is stronger correlation to price classes, than to sectors or indexes. This observation is loosely confirmed by comments on SI threads. For example, the momentum traders I follow prefer stocks in certain price ranges. Further more, Motley Fool, a currently widely read investment book, also confirms this observation when they encourage investing in 5-25 dollar stocks with a low capitalization--their reasoning is that these stocks are the most likely to be profitable on long term buy and hold. I believe trader's trades are influenced by the price of a stock rather that by what sector it is in. A further observation is that of the split phenomena which is when stocks drop into a different price class.

Any thoughts?
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