Dow Differentials long standing Dow Theory is based upon theory that if the Dow Index is doing wonderfully well, however the Dow Transportation Index is not corresponding: well then one might have reason to be a bit suspicious about any implications of an isolated DJIA traditional Dow Theory would seem to be based upon a theory that if business is doing so well, why is it that transportation does not signal a corresponding flow of goods and "suits" the gecko also observes any Dow differential: id est: the difference (delta) between "blue chip" Dow and the entire market (like Wilshire 5000) notice that the gecko did not even try to make any quips about sub-prime mortgage debt, much too easy a chip shot; (see: golf explanation of short shots vs. lobs) and besides, the short attention span of retilians tends toward becoming bored about static topics; well anyway, one needs to have an opinion about how to read such Dow Differentials keeping in mind that when the broader market is of similar point of view, well that's prime timing for the reptilians to move catching the largest quantity of unsuspecting market herd mentalities see the illustration at: Wall Street Wabbit remember though, the concept works in both directions, however a bit assymetricaly because of the different natures of bull and bear market environments

so as to help people better understand Wall Street type talk; Gecko will begin with offering a gramatical translation for:

"overweight cash" if one hears Wall Street types speaking of being "overweight cash", what they are saying is that they have sold off stock holdings which is related to the concept: euphonism

if the market goes opposite to your investment decision it might simply indicate that you made your move too early being that the stock market goes up and down, if you wait long enough your investment decision might someday seem correct

it is the "gecko's" understanding that there exists a concept from the options trading pits of Chicago which conceptualizes that the "laws" of the "gods" of the trading pits is such that: only once in your life are you allowed to buy at the absolute lowest price and also, only once in your life, are you allowed to sell at the absolute highest price other then that, you can do as much trading as you want

as far as almost being actual useful trading concepts: stock options are basically "insurance policies" designed to hedge the risk of adverse market turns farmers can sell futures guaranteeing a price for their crops, and airlines can buy oil (fuel) futures to lock in a price the way the "game" works is that one would try to buy options when volitility is low (there tends not to be much "insurance" concern during stable markets) selling options during high volitility is then profitable (such insurance policies are more in demand during uncertainty) the ole buy low, sell high, applied to options the pricing of options is determined by the: Black-Scholes option-pricing formula which is basically comprised of five factors: the price of the stock the exercise price of the option and the length of time to maturity of the option the risk-free interest rate the 5th factor being the volatility of stock price one might want to look into the PBS NOVA documentary: The Formula That Shook the World and the SuziQuant.com explanation of the infamous Long-Term Capital Management (LTCM) disaster

to continue trying to share possibly useful trading concepts: over the long term markets have an overall uptrend, which tends to make it relatively more difficult to make money selling short (over the long term) although "bear" markets, being fueled by fear, has tendency to exhibit quite dramatic downturns as compared to "bull" markets which are characterized by slow steady herd type momentum "bull" markets are fueled by greed, where everyone wants to join the trend when they see the market going up fear is a more immediate and powerful short term force, when one realizes their hand is on a hot stove one quite quickly removes it bull and bear markets have quite different characteristics

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this webpage was last updated on: November 15, 2007

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