The other day Robert, a loyal subscriber, asked: “What’s the difference between the DOW, S&P and NASDAQ?”
Well, Robert, your question is not uncommon and I’ll give you the “easy to understand” explanation.
First, let me tell you that they are all indexes of different parts of the market. Second, the presstitutes use these indexes to mislead you about how the markets are performing.
The key to understanding them is knowing what each one represents. When you get that right, you’ll have a keen sense of market movements both here and overseas.
Each index offers a different perspective and take a look at how they differ.
The DOW represents the “BIG” money. In most cases it leads the way. The reason is it’s the first index to moveup from the lows. It comes from foreign capital moving to the US based on currency valuations. You’ll also notice that it’s the first index to top out because BIG money tends to pull out also based on currency valuations.
Foreign capital always buys the Big Name companies, especially in a crisis. That’s why the DOW is an important index.
The S&P 500 usually reflects the more serious money in the markets and the majority is made up of domestic companies.
It represents 500 stocks ranging from small to mega-sized companies (giants like Apple, Google, Amazon, etc.).
Last, we have the NASDAQ.
It represents the retail market and (unlike the DOW and S&P) it’s the last one to peak.
Some of the most spectacular movements of stock happen in the NASDAQ…It also crashes much faster.
So, how should you allocate your money among these indexes?