Benner’s Cycle is a simple model that predicts the ups and downs of the stock market based on a repetitive market cycle that lasts 18/16/20 years. Overall, the model is reliable at the beginning of each market cycle, and completely unreliable at the end of the cycle. As concerns market tops and mid-cycle tops, the model is sometimes accurate, and sometimes not.
Introduction to the Cyclicality of Financial Markets
Financial markets tend to follow specific cycles. In the long run, these cycles are forming time patterns. The identification of these patterns can optimize investment decisions. Knowing the potential starting year and completion year of each market cycle can prove very helpful to investors.
Market cycles follow economic cycles, which are formed based on market liquidity conditions, inflation, and the interest-rate cycle.
A market cycle includes two or four distinct phases. Each phase corresponds to specific trends that emerge during different economic conditions.
Generally, a market cycle can range from six months to many years, or even decades.
The Dow Jones Industrial Average (DJIA) is the most important and influential stock market index in the world. S&P 500 is in the second position, followed by the Nasdaq 100.
The Importance of Dow Jones when Backtesting Trading Strategies
Dow Jones is so important that if an equity-trading strategy doesn't work with Dow Jones, it can't work with any other index. Therefore, Dow Jones provides the ultimate framework for historical backtesting.
Short History of Dow Jones
Dow Jones Industrial follows the price changes of 30 US companies, and that is why it is often called Dow(30). Originally, Dow Jones Industrial was introduced in 1896 by Charles Dow. Earlier, in 1884, Charles Dow introduced the Dow Transportation Average, which is the oldest stock market index in the United States. The Dow Jones Industrial was originally used to measure the stock prices of industrial companies holding the largest reserves of raw materials. Later, the composition was expanded to include companies from more industries. From 1928 until nowadays, the composition of Dow Jones Industrial has changed 45 times. In 2009 General Motors and Citibank gave their place to Cisco and Travelers.
The Dow Divisor
The DJIA price consists of 30 stocks prices which are divided by a particular divisor. The Dow Divisor measures and excludes the effects of stock splits, reverse splits and other structural changes.
The 30 companies listed on the Dow Jones Industrial are traded either on the New York Exchange (NYSE) or on the NASDAQ.
Here are the 30 companies that are included on the Dow 30 along with direct links to their official web-pages, symbols, date of original listing and current weighting on Dow Jones Industrial (last change 2011).
A stock trading system combines rules and techniques to analyze the current market conditions and suggest entry and exit points when trading financial securities.
Selecting Stocks in 4 Steps Using Fundamental Analysis
Designing and implementing a system to evaluate real corporate value is absolutely crucial if you are a stock investor. Here are the four (4) steps that any investor should follow before buying any stock.
I) Evaluating the Industry
First of all, you must define the core industry of any company by determining factors such are:
Stock investing means gathering fundamental information and choosing stocks by analyzing them. Equity traders have access to thousands of stocks and indices from all around the globe.
Equity Investing
Technical analysis is always important but the key to equity trading is fundamental analysis.
TradingCenter's outside-in investing model
Outside-in investing means beginning by analyzing the economy and the general industry and then moving to individual corporate analysis. Our system can be implemented in five steps:
(i) Macroeconomic Landscape {identifying the stage of the macro-cycle}
(ii) Industry → Sector Analysis {technology, future growth rates, threats of substitutes}
(ii) Management Evaluation
(iii) Identifying the Corporate Strategy {Competitive advantage}
Being able to evaluate real value is very important for making profitable stock-market investment decisions. These are the five most important stock evaluation methods:
Peter Lynch's Secret Formula for Valuing a Stock's Growth
The Standard & Poor's 500 index includes 500 leading American companies listed on the NYSE or NASDAQand captures 80% coverage of available market capitalization.
■ Ticker symbols: $SPX | ^GSPC | INX
The S&P 500 stock market index is based on the market capitalizations of 500 large American companies having common stock. S&P 500, introduced in 1923, as the ‘Composite Index’. On March 4, 1957, it expanded to its current 500 stocks basket. Today, it is one of the most traded equity indices in the world. The S&P 500 differs from other U.S. stock market indices, because of its weighting methodology.
S&P500 Calculation and Weighting
The S&P 500 has traditionally been a capitalization-weighted index. Since 2005, the index calculates the market capitalization of each company relevant to the S&P 500 using only the floating number of shares (shares available for public trading).
Table: Top 10 Shares by Index Weight in the S&P500
TradingCenter provides essential information and tools for learning and trading the Global Financial Markets. TradingCenter helps investors to improve their skills and their level of understanding regarding core mechanisms of the trading process.
INVESTING & TRADING STOCKS AND INDICES