Fo(u)r Speculation Index, FSI

The answer to yesterday's title question "Are there some sellers out there?" was answered with a yes for about an hour in the morning but a no after as the market started a big rally that went vertical in the last half hour of trading. As we mentioned in our last post, the market would need to go down soon or there would be some possibly quick upside. Well, surprise, surprise, surprise (Does anyone know Gomer Pyle?) the market decided to rally. Now, we are wondering what else can happen in the short run.

After last week's Fed letting, the market couldn't hold its gains and on Thursday dropped, a lot. Since then the market has struggled to get back to those Wednesday highs. The NASDAQ indexes have faired better than the blue chips, like the Dow and the SP 500 which have struggled.

With GM's news of a $39 billion write down in the third quarter, due to a tax credit that they now can't take because they weren't profitable, the market needs to take a few seconds to deal with that number. Shouldn't be a big deal, it's only $39 billion after all.

CM sent us a URL of a Jim Jubak article on MSN which pretty much will write our blog for us this evening. He hits on several of the points we have mentioned over the past few weeks here so we recommend it to clarify some of what we have been trying to say.

We have been working on our Horsemen index which we now need to name. Some of our choices are 1.) HMI, HorseMen Index; 2.) FHI, Four Horsemen Index; 3.) HIP, Horsemen Index Phour (ok, ok, maybe not); 4.) FSI, Fo(u)r Speculation Index; 5.) Something you call it???

Anyway, we have some fascination for the arithmetic index with simply adds up the value of all the stock prices and then we "normalized" it to start at an index level of 100 on October 22, the day before a big increase in prices. We will show the market value weighted index as well but with the market value of GOOG and AAPL being larger than the others, it may not be the way to go. Here, too, with the market cap weighted average, we "normalized" it to start at 100 back on October 22. We plan to keep track of this to get an idea when the overall market will turn down. (Jubak seems to think after next year's election.)

Arithmetic Price weighted average: 111.86
Market Cap weighted average: 111.35