LG; I've been over this before , so I wont into a lot of
detail, I run the DOW 30 market cap weighted..which produces
a market cap result. The real index is price weighted and runs all
over the place, as GE with mega more market cap can only move
the index per point move the same amount as UK , it's insane.
Also I do a head 10, bottom 20 market cap thingy to see when
the tail is wagging the dog.
So what I leading up to..is the Dow on April 17th I have at
9167.5 , it was slightly over price via the market cap,
by about 2% and should have been 8984 at the time.
well since then the market cap has gone down only 2.1%
which would put fair normal market cap vs index price
at 8795 at this time.
We are still over sold about 220 on the
DOW 30 in respect to it's normal market cap vs index price.
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If the charters would chart market cap, and not index prices
they would see a different set of highs and lows, and most
of the index tops would be cut off, and most of the lows not so
deep,,and the time between them would be spread out too.
The TA on an index is nothing like the TA on a single stock, but
for some reason most TAers apply the same criteria to an
index as they would a single issue. With out any consideration
that the index is often an exaggerated representation of the
market cap ( value ) of the issues in it..while on a single
issue the market cap changes in exact proportion, but this does
not apply to indexes & is really really bad on the SOX.
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The S&P is cap weighted but not in proportions that are
truly symmetrical. Also it's reweighted dynamically to produce
a sort of 3 day running fix..<G> wish I knew how to explain
it better..but just the same the INDEX values can over shoot,
and under shoot the market cap values, not as bad as the DOW,
or near as bad as the SOX..but it does not give a true reading
of the market, or it's tops and bottoms, so just how do
wave counters know when the market peaked or bottomed, if they
are looking at index numbers that can be + or - 2% with no
problem, or equal 4% error between tops and bottoms, and the
market cap peaks and vallies may be 10% futher apart than
the index ones.
I've seen the Dow index go to a 6% error relative to market
cap. So where I say normal via market cap value at this time
would be 8795, I know 6% down from that is possible with the
same market cap hence we could go to 8267.3 and still have our
same cap, ( not likely but it can do it ) Also we could go to
9322 and still not leave the range that I've seen the index
diverge from the market cap values. ( but that's not likely
either ).. yet it does happen. At this time the index is not
that far off from it's normal market cap value..
only 220 below it, a few strong buy orders in the lower end of the
index ( the more thinly traded issues ) can send it up fast.
Most of these just happen to be the ones which have the better
P/Es at this time. I have no idea if that will happen any time
soon, but in time water will find it's own level.
Meanwhile I'm picturing a few very aggressive fund managers,
with large money, trading via computer programs,
and sending out pre planed buy and sell orders at times on the
thinner traded issues to push the index the way they want it to go
via their derivative positions, then dumping a similar basket
to send it the other way after they reposition their options.
They also know that just getting it started forces the index funds
to buy or sell the more liquid issues. I firmly believe there are
some big offshore funds eating this market alive.
Last for thoes who wonder about the low volume today in respect
to the move up in the indexes, it's because some of the buy
program trading today hit the thiner ( less float ) stocks.
They can program trade and put the index just about where they want it, within certain limits, then collect on their derivatives reverse their position and let it fall. We are just minnows swimming with the sharks. All the garbage on CNBC about how this caused that, as
if they know; it is just fluff to keep you tuned in and make you
think they know something. This market responds at least short
term to specific strategic plans of some very big players,
and CNBC has no earthly idea of who they are, or what's really
coming down next, at least in respect to the indexes and futures.
If the SEC were to force the market to display a running percent
of short sales it would level up the playing field a lot.
There is no earthly reason they can't do this, the fact
that they wont do it, tells me that none of them have any
more scruples than the pimple on a pimps rear end. <G>
Jim
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