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

To: ViperChick Secret Agent 006.9 who wrote (17117)	4/23/1998 12:32:00 PM
From: James F. Hopkins	Respond to of 94695

Lisa; I've posted a lot already on indexes, maybe not as clear as it could be done..vut with the same basic message..what you see is not always what you get..( or what the market is doing ).. ------------------- The S&P , and most are weighet via market cap..which is a better indicator of the market than price weighted ones. The Dow some will argue is price weighted but it's not truly weighted at all. It usees a divisor and any issue in it will move it exactly the same per change of price in that issue as the same change of price in any other..so if UK goes up 2 and GE goes down 2..and everthing else were to stay the same price,, UK and GE would cancel one another and the index would be flat..yet I can tell you that without a doubt if GE goes down 2..a lot more money just left the dow..than came in on UK going up 2.. ---------------------------------- The top 10 market caps in the Dow have almost twice the money riding on them..as the lower 20 put to gether..right now the lower 20 with about half the brute capital in them has gone up since jan 16th almost twice the big dogs have and that makes the index itself a bit over blown. ------------------------------ While market cap indexes reflect better how the market is trading they to can get off..it depends on how the volume of trading is doing on the issues inside the index. If CPQ gaines 1/2 point on 24M shares traded that 1/2 point is only reflected in the market cap. While some other stock x may go up 5pts on 100K shares hecnce push it's market cap way up.. the averge gain or loss in market cap of all the issues is what the weighted index is showing..but cpq just traded up 12m dollars, and only traded up 500K or a half million..yet it skewed the index way up..with it's change in market cap. ------------------- The above is more extream than the normal course of things but makes it easyer to see how thinly traded stocks often skew the index , even in cap weighted ones, that is in respect to the actual money chaning hands. ---------------------------- Total up volume in dollars less total down volume in dollars, divided by the avg price of all the issues..would produce a percentage of gain or loss in any index..this very often will not be shown by the index itself..and indeed can go the opposit way. -------------------------------- You can bet the pros with super computers are tracking that.. and know when the index is a smoke screen, and in fact can program to sell off certain ones while they buy others to mask the sell off, then latter dump the thinly traded ones they bought to send the index down fast..which triggers a larger sell off and they start buying back the ones they eased out of earlyer on..they sell into index rallies they create..and buy on dips they also create ..as too many people are just looking at the index..and it's not telling the truth about the trading it's really a trailing indicator..and thats why so many people get caught on the wrong side of the curve. This don't happen all the time, but you need to be looking for it if you market time, for if it is happening and your only using TA on an index it can kill you. Trends.. Think ratios and percentage too..compare the S&P500 to the S&P100 flaten out the curves some with 3 day closing averages of both.. if the rate of climb is better in the S&P100 the market is strong if the S&P500's rate of climb starts exceeding the rate of the S&P100 just keep a watchful eye..if you see them going in oposite directions very much and for three days runing chance are you will see a revesal in the market soon. The 500 may outrun the 100 for a good spell but the 100 will show the direction and basic strenth of the trend. use percentages to express the rate of each. If the rate is close the trend will continue..the more divergence in the rate the stronger or weaker the trend will be..the 100 setting the tone. Jim