Friday, October 15, 2010

Dow down "only" 50

Today's action exposes the major flaw in the Dow Jones Industrial Average, other than it really being about half industrial stocks. The Dow is price weighted and that means the higher the stock price the more influence it has. For example, the highest priced three stocks are down about 0.5% today on average. The lowest priced three stocks are down 5% at one point before AA came back.

Overall the Dow is down less than 0.5%. This masks the damage done to the banks and part bank GE.

One more reason not to look at the Dow when assessing market trends.

5 comments:

William said...

Seriously, I wonder how much of the 30 Dow companies stuff is made in China. The Dow is more like China's industrial average.

Rooney said...
This comment has been removed by the author.
Rooney said...

It is just like Petrobras in Brazil and HSBC and China Mobile in Hong Kong, Reliance Industries in India, the whole index is distorted

Quick Takes Pro said...

William - so brutal, so correct

Quick Takes Pro said...

Rooney - Apple is how much of the NDX? Seems like 90% but is is 21% (http://www.invescopowershares.com/products/holdings.aspx?ticker=QQQQ)