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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 671.910.0%Nov 14 4:00 PM EST
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To: HighTech who wrote (543)12/5/1998 6:57:00 PM
From: j g cordes  Read Replies (3) of 99985
 
HiTech.. "so what's the conclusion from this data."

The large indexes have received the lion's share of funds flow through the 90's. This
has been a well commented phenomena or recent times.

This extra weighting of money into the 100, 500 and Dow average has skewed the
historical pattern of market cycles, especially the late market topping observation of
smaller stocks running to extremes (which some are now saying the internets signal).

A 200 day cycle is a traditional moving average measure which I think may be past its
relevance due to this change in index dominance. Its certainly not as relevant to
compare the large cap indexes to the Naz as it once was because the cash inflow
placement pattern has changed.

However, it would be interesting (and perhaps predictivly profitable) to identify and
count the number of stocks within an index that were well above their index average in
July and see if within that index now there's a similar excess. I don't think the same
stocks will always be extreme in each cycle, but the number of extreme stocks might
correlate. There may be a general selloff rule which applies to index behavior when a
percentage of stocks go to extremes.

Jim
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