When I first started trading, I remember someone told me about a price correlation between SP and Dow...something on the order of 1:10.. When the SP rises 1 pt, the Dow should rise roughly 10 and vice versa.....or something to that effect.. Anyone know anything about this or is it just Inconvenient Fantasy?? Thanks...
On a longer-term basis, the Dow Jones has rallied ~6,000 points while the S&P has rallied ~650 handles producing a ratio of ~9.23. On a daily basis, the ratio can generally range from 8 to 10 when the Dow is up or down more than 20 points. It's a consistent ratio, not a perfect ratio. If you have "sector rotation" from large-cap stocks into tech stocks and vice versa, you can have weird situations where one index can appear to be greatly outperforming the other.
An extraordinary movement in a smaller capitalized Dow stock can drive the spread whacky as well. A $4 move in something like 3M can move the Dow 70pts without being a pimple in the weighted SPX....