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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 692.76

+0.5%

Jan 26 4:00 PM EST

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To: James F. Hopkins who wrote (2938)	12/27/1998 9:05:00 PM
From: Follies	Read Replies (1) of 99985

Glad to hear we are converging on this. When I said same amount of shares, this is what I meant... Suppose today I invest $10000.00 into the SPX and it requires I buy 140.000 shares of GE, 110.000 shares of MSFT, etc.. One month later the SPX is up 10%, my investment is now $11000.00, If I were to add $11000.00 of new money I would buy 140.000 shares of GE, 110.000 shares of MSFT, etc. the identical amounts of shares I bought before. Those same shares now cost $11000.00 though because the index went up by that much. ALL THIS IS INDEPENDENT OF THE PRICE MOVEMENT OF THE COMPONENTS (GE could have doubled and MSFT gone down 50%). I don't mean to shout too loudly but it is the key to cap weighted indices I believe.

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