Comparing the Dow 30 Vs S&P 500

[SallyT]

As I understand it, there are 30 conglomerates/corporations that make up the Dow 30 and 500 lesser sized companies that make up the S&P 500. Can anyone explain in simple terms why they mirror each other, most of the time, when comparing chart patterns? Logic says they should be different - but then again, what's logoic got to do with it!

Sally.

 

[FTSE Beater]

Hi Sally

I believe it's to do with the weighting of the index. The top company in the 500 has the greatest effect, where as the 500th has very little influence.
Therefore the top 30 companies have a very large influence with the other 470, making just a slight difference.

I'm fairly sure that how it works

 

[Racer]

Considering all the Dow components are also listed in the S&P is it that surprising i.e., it isn't just 500 lesser size companies on the S&P

 

[a320]

A useful site.....

http://www.indexarb.com/indexComponentWtSwitch.html

 

[maxpain]

I prefer SPX500 to the Dow30. XMI - Major Market Index - it´s the only index being in the red all day today. Other indices are easy to manipulate on a few stocks on a low volume day as we have today (MSFT INTC IBM etc.)

 

[a320]

I keep an eye on the OEX....

 

[Racer]

a320

 

[maxpain]

I keep an eye on the OEX....

a320
what do you read from that chart?

 

[josbarr]

S&P 500 is also called the Broad Market