Bill; Some food for thought ! I'm sort of seeing a trading range, more than any thing else, and it may have ticked down , and be about ready to tick up.
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I re weighted MY DJI components on April 17..
The DOW index was $9167 , it sits at 8711 for a 4.9% loss
re weighting at that time by market cap I used $35,785.
at this time it is $35,244 for only a 1.5 % loss,
THE index is 3.4% lower than it would be if the Dow were
weighted by market cap like the S&P is.
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The major difference is in the larger more liquid stocks
ACTUALLY the TOP TEN DOW STOCKS ( head ) is UP, 1.2%
The entire loss in the DOW is in the bottom 20 stocks
IF you group them by market cap 10top to 20 bottom.
THE big caps having taken in enough to make it more liquid.
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This is really a large divergence , all they have to do to lift
the DOW is start buying the bottom 20 , and she will kick butt,
as they when bought or sold move the index point for point as
much as the top 10, BUT they can do it on much less volume
Smaller cap stocks move faster on volume than larger cap ones.
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This move to the larger cap more liquid stocks has not just been
in the DOW , it's been in the S&P and OEX too.
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A rather safe bet would be to just buy the AMEX (DIA,) as soon as
one sees the DOW start up. AS she has diverged down ward below
the S&P percentage wise , it gives you a basket of all the DOW
stocks. The Dow has come off her highs about 6% and were I was
looking for a 10% correction it may not come, as enough time has
just about gone by. I would still want to wait this week out
but will consider it before the 1st.
If the DOW ( tail ) starts up she will move the index up fast
the tail is now below the head , more than it was above it
before the decline.
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That head/tail divergence works , it may increase a little more
yet..but I'm now watching it more than I was.
Every bit of the downside in the DOW, market cap wise is now in the
TAIL. and the tail might be close to wagging the dog.
This is a sort of mid term out look, longer term I still see ASIA
as a problem. AT this time from April 17th the HEAD is up 1.3%
the TAIL down 6.77% for a total divergence of 8.7%.
That's why I say she wants to go up but is scared, let that tail
start moving up and the DJI index can make a nice jump.
Jim
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