Dow

[Hoop]

Don't focus on the Dow. It's the S&P 500 that matters.

http://www.theage.com.au/business/ma...08-gto0fg.html

It depends on what you are trying to achieve..
...The S&P500 is great for short term costing or fundamental crystal ball gazing doing forward analysis of various kinds..
...The DOW for its longer term cyclical/secular trends and behaviour including its Theories
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The media pushes it's own barrow in hyped up fashion and unfortunately the readers are guided into narrow thinking and go off half-cocked forming malformed deductions especially when the DOW/S&P500 suddenly do a short term correlated blip and go outside their Correlation coefficient "norm".

For the record..The DOW of 30 stocks performs nearly identically to the S&P of 500 stocks..I googled quickly to find the correlation coefficient between the two ...the daily percent change (deviation) is 0.96163....1.0 is identical so DOW V S&P500 have very close to identical daily movements..

So why the sudden media drama??...My guess from googling is that the last 30 days the correlation coefficient has trended down to 0.91 ..If I remember correctly from doing countless statistical analysis back in the days when pterodactyls still flew around in the skies >0.85 was considered highly significant correlation...so 0.91 is by no means a bad news DOW event that the media makes it out to be..

So when it comes to analysis or forming a base for a theory, or to correlate figures into a meaningful objectives, the longer the history/larger amounts of data the better the quality of analysis....With that in mind the DOW needs to keep functioning for as long as it is possible..for Centuries more preferably (data-wise)

The DOW was created back in 1894..the S&P500 was created in it's present form in 1957.. IMHO.. even though S&P500 analysis is being used more frequently than the DOW these days in refining Sharemarket Theory, the S&P500 still needs many more decades of data before it could safely replace the DOW and make the DOW irrelevant....In the meantime the DOW/S&P500 showing near identical movements the hypertheoretical reliability to be able to confirm each other during Wall ST cyclical corrections and reversals is very very important....Decades ago it was the DOW industrials /Dow transport confirmations...With the S&P500 becoming the more superior index it is now DOW/S&P500 confirmation or in some cases the Russell index is included in the confirmations as well..