DOW Cash Long Term

as the DOW is the focus of so many perhaps putting it in perspective is in order

Allyb - I was under the impression that the DJIA was an index that used a simple average of its components but I've just taken a look at this page on the DJI web site: DJIA
and it looks like it's a weighted index?

Question answered. I got this reply from dowjones.com via email:

quote:

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The DJIA is still a price weighted index. The weights that are shown at the link are weights of the individual companies in the index and are no relevant to how the index is calculated.

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For the record, dowjones.com took 20 minutes to respond to my email. That is, in my opinion, an amazingly fast response for a company.

Alleyb: You mentioned 11840 as the all time high in the futures. The reason that I would rarely look at this figure on an "all time" basis is that the futures may be at a high premium because the contract is young or at a low premium because the contract is about to expire so unless you know the days to expiration you are not comparing like with like. For that reason I would usually only compare the cash indices when looking over a number of years such as now.

for me the premium is irrelevant as a pure basis trade.I have had these discussions on many occassions over the years. The number has validity as a number actually traded and therefore for me is a valid level irrespective of whether it was so called expensive or cheap at some given moment. I think proof of this is in the pudding in that once 11840 was cleared it became a defacto acceleration point. Re recent breadth and volume there is no question that we are experiencing an increase in both and until the last bear throws in the towel then we do not have a meaningful top to counter trend trade the move. 11840 stop close is now the key to the markets well being or potential failure

By that implication, you would consider the price points created in one contract tradeable in another contract. So if we are on rollover day and we are now trading the Z6 contract, you would consider the high, VAH etc. from the U6 contract to be significant (and tradeable) while trading the Z6 contract even though that contract might be trading at a premium of several points to the expiring contract.

Example on Rollover day:
- U6 makes all time high on previous day at 11900.
- Z6 opens at 11850. (U6 is at say 11780 but we're not trading that anymore)
- Z6 moves up to 11900 and breaks out.

This doesn't make sense to me...

I am not entirely sure what you are trying to get at. Maybe I am failing to communicate something that to me is simple but
I think why it does not make sense to you is because you are trying to assign a different set of variables.....like for like and pure numbers.... For me it is very simple - numbers repeat themselves constantly. The only question is when and the reaction to them at that given time. to repeat your comment
Example on Rollover day:
- U6 makes all time high on previous day at 11900.
- Z6 opens at 11850. (U6 is at say 11780 but we're not trading that anymore)
- Z6 moves up to 11900 and breaks out.
you say makes no sense to you....
well lets try the numbers game as is written in many algorithic auto black box systems for one cares not why in fundamental terms but in pure maths terms.
you are trading the U6 contract and then one day you can no longer trade the pure U6 contract. The next month Z6 trades at a premium to the previous U6. You are flat U6 you enter a trade in Z6. The relevance of the Z6 price is born out of a prior relationship of the basis but in reality is irrelevant for your purposes. Your reference point that you are using is the prior U6 high and it breaks out.....what is there not to understand...The black box trade would have been programmed along the lines of ---- Z6 last trade X. Compare to daily chart ie Z6/ Compare to weekly chart ie U6 / as well comparisons would be made to monthly, quarterly, annual charts all of which will have been referenced to previous contracts ie the annual chart will reference the March contract / then if above previous high .....in your example 11900 then buy .........

Suggest you now go check out the mini dow chart and replay the trade at 11840 and see what you still do not understand
I would add that previous contract gaps are also a similar situation ie that those levels created by the prior contract gaps are an influence on the current contract.

You see its all about foreground and background within the market profile whereby the market place is just a data wharehouse and it is all about how your organise that data to then be able to analyse/mine it

I suppose that the only way that I could resolve this question (for myself) would be to take a set of rules that looked at the significance/probability of highs (for example) and run that against a continuous futures contract and also against its underlying cash index and test for what we are discussing.