The Best Trading Fundamentals Dow Jones
Dow Jones Industrial Average is also popularly known and simply as Dow. It is the stock index of the top 30 companies listed on the stock exchanges in the United States. It is maintained by S&P Dow Jones Indices LLC, a joint venture between S & P Global, the CME Group and News Corp.
While it was initially created to measure the strength of the US economy, since most Dow Jones companies are global giants such as Google, Microsoft, Apple, Nike, Cisco, Visa, Boeing, etc., its value reflects the strength of global global economic activity in modern times. Most large companies in countries are, in one way or another, tied to the income of these companies. A better indicator of US economic activity is the S&P 500 index.
Dow Jones a detour back in time
The Dow Jones Industrial Average came into existence on May 26, 1896. There were two co-founders – Charles Dow, who was the editor of The Wall Street Journal and a statistician named Edward Jones. Together they created Dow Jones & Company.
Despite its name, it is no longer an index of enterprises exclusively in the Heavy Industries sector of the economy. This has kept it relevant in modern times. However, the calculation method has remained unchanged. Dow Jones is not weighted by market capitalization. Instead, it is calculated by adding together the share prices of the constituent companies. This is then divided by a number known as the Dow divider that remains constant. Unless there is a change in the total number of shares. For example, a share split, merger, index promotion / decline may justify a change in this factor.
The reason for this method of calculation goes back to the origin of Dow Jones. The initial calculation of the index was a simple arithmetic mean. After the inclusion and exclusion of a large number of companies for more than a century, this calculation has changed to ensure the continuity of prices. In addition, stock events also meant that a simple calculation of the arithmetic mean would cause a large deviation.
Dow Jones back to today
The goal of the Dow Jones index is to measure the health of the country’s economy. Because an index (in theory) is not affected by the impact on a single company or industry. Instead, it offers a generalization about major companies that adopt the highest levels of corporate governance standards.
Despite the fact that Dow Jones is not a financial asset in itself, there are now a number of products to speculate on its performance. These products reference or attempt to replicate the performance of DJIA. For example, a mutual fund can keep the shares of companies in the exact (or close to the exact) ratio like the Dow Jones. Accordingly, fund managers rebalance the fund as there are changes in the composition of Dow Jones.
Almost all major brokers now offer a 24-hour market, Dow Jones CFDs and spreadbetting outside the official NYSE trading hours. However, the Dow can only be calculated during exchange trading hours. This is because the stock prices of the Constituent shares are not available to the public, outside the official trading hours. However, since there may be market news that can make a trader want to speculate on the Dow’s opening price the next day, these products offer that option.
Therefore, the price displayed on broker sites outside of trading hours is based on other benchmarks that are open in their respective market location, for example. The FTSE 100. In addition, the price also depends on the Dow Jones futures market, FX rates and index-linked funds and ETFs that are traded on other global stock exchanges. While predicting individual stocks requires considerable research on that particular company, an index is more sensitive to macroeconomic data.
Stock index prediction Variables and factors affecting Dow Jones
dollar rate (USD) in fx markets
First of all, as the USD appreciates its value, this causes a drop in foreign investment, as foreign investors get less USD for their currency. Therefore, large global investors will not use their USD reserves to buy US stocks. On the other hand, the depreciation of the USD will make Dow stocks cheaper. Therefore, the index will increase in this scenario.
Second, higher inflation means depreciation in the value of USD and that U.S. companies can sell their goods and services at higher prices. Therefore, the index will increase in the short term as companies are bringing in more cash. However, this will result in higher wages of employees and a higher cost of goods and raw materials. Therefore, high inflation over a sustained period of time will cause the Dow Jones to fall in the long run.
Third, short-and medium-term peak interest rates will have an impact on the stock index. This is because higher rates will mean a (relatively) risk-free alternative to stocks, a riskier asset. However, high long-term rates will reduce bond yields, and therefore money from large investors will move into stocks, causing the Dow Jones to rise.
and the rest
Finally, other factors such as the unemployment rate and the PMI (Purchasing Managers Index) also affect the Dow Jones. For example, a high unemployment rate will lead to a drop in consumer demand and this will lead to a downward trend in stocks. On the contrary, a higher PMI in the United States will mean an increase in economic activity, which will lead to higher employment and high demand for goods and services produced by Dow Jones companies.
Stock index prediction How to apply this to trading
STOKAI provides daily prediction using algorithms based on all the factors that affect the Dow Jones price and evolves this for 10 days in the future. Tutorial and brief user guide is available here-Tutorial. If there is any problem, please contact our customer services team.