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

To: Enigma who wrote (33758)	11/16/1998 3:28:00 PM
From: epicure	Read Replies (1) \| Respond to of 94695

momentum

To: Enigma who wrote (33758)	11/16/1998 10:22:00 PM
From: James F. Hopkins	Read Replies (1) \| Respond to of 94695

E; Mo Mo stocks are the BIG Market CAP stocks driven by momentum. The S&P 500, has 50 stocks that make up over 50% of the market cap of the index. The other 450 just drag along, it happens that index FUNDS have to buy or sell more of the Large Caps to track the index as it is market cap weighted. In effect after a stock like MSFT gets so much market cap the shear mechanics of the index and arbitrage trading gives it such an advantage that real fundamentals go out the window. ------------------------- With derivatives, index funds and such, the cap weighted indexes turn the market into a sort of communistic orgy, that favors very large cap stocks regardless of their real merits, they run on momentum. ---------------------------- Stocks like MSFT get extra help, when they are in more than one index. Take the Nadaq 100, 4 stocks make up 50% of that index and arbitrage trading on index futures & options means that the top dogs once in place are bound to stay there. It's a serious flaw in the market system, but the big brains don't see it. I doubt they would change it if they did, as too much money is involved. ----------------------------- Jim