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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (12919)	1/9/1998 7:59:00 PM
From: Spots	Read Replies (1) \| Respond to of 94695

Jim, believe me, I'm not arguing either with your approach or with your terminology. I merely reported the generally accepted terminology for indices such as the DJIA, namely, "price-weighted." I've read this term in a number of places, but most recently in "Options as a Strategic Investment" by Lawrence G. McMillan (New York Institute of Finance, 1993), pp 498-500. This happens to be where I looked up which indices were market cap and which were price weighted for my earlier post to you, not wanting to steer you wrong, and I happened to recall that McMillan had discussed the various index types (there's no other significance to the reference in this context). I've read the same statement many other places, including, if memory serves me, on the NYSE web site (but I wouldn't swear to this last one). The point of the term is that the higher priced issues affect the index more by the same percentage moves than the lower priced issues do. If IBM goes from 100 to 110 (a 10% move) that moves the DJIA 2 1/2 times as much as if UK goes from 40 to 44 (another 10% move). Again, THIS IS NOT MY TERM. I'm only reporting here, not making it up. There have been many gripes about the DJIA and other market indicators over the years. You pick the indicator (index, average, oscillator, whatever), you can bet you'll find someone to gripe about it. I was interested in your particular approach out of curiousity; specifically, I wondered if it differed substantially from broad cap-weighted indices such as the S&P 500. Frankly, I'd be surprised if it did, but if I get a surprise then I learn something, which is why I asked the question in the first place. Regards and best of trading to you, Spots