Market Capitalization or Weighting

Discussion in 'Trading' started by carltonp, May 12, 2011.

  1. Hello Traders,

    I have a very general question that I hope will provide plenty of feedback.

    I would like to hear your comments on how many stocks in an index needs to be advancing before you can reliably conclude that an index will move up?

    Also, what do you think is a better measure of a companies ability to move an index, Weighting or Market Capitalization?

    For example, if 5 companies from the DJIA were moving up and those companies were, Cisco, Intel, American Airlines, MacDonalds and American Express, would that give the typical trader enough confidence to conclude that the index is going up and purchase one mini-sized contract?

    The same question with the S & P 500, and the E-mini S &P

    Naturally if one company has a higher weighting than another company in a index that would be a better measure of that companies ability to move an index. However, I would also like to hear whether you think Weigthing or Market Capitalization is a better measure?

    Thanks in advance for your comments.