Dow's Ratio to S&P 500: What Does It Mean?

On November 20, the Dow’s ratio to the S&P 500 broke 10-to-1 for the first time in over four decades. What did that mean?

I’m not sure but it did happen to coincide with the market’s bottom. Both indexes have rallied nicely since then.

The black line is the Dow and it follows the left scale. The blue line is the S&P 500 and it follows the right scale. The lines are scaled at 10-to-1.

Comments

[victorberry:]

Perhaps this is an early signal of the eventual demise of the DJIA. If 80% of the jobs in America are created by small businesses, then why don't we bust up the 30 largest corporations and eliminate a future "too big to fail" threat? Goodbye and good riddance to government of, by, and for the big corporation!

Jan 11 03:11 PM

[townncountry:]

Possibly that SPY has become more volatile than DIA? If SPY's beta is increasing, that would suggest either that some new components of SPY are causing the beta to (artifically) change, or that something in the economy is being captured by the larger basket of stocks than in the Dow.

Jan 11 05:47 PM

[granger:]

My guess would take it mean time to buy the broad market.

DOW is narrowly based 30 stocks, S & P widely based, 500 constituents.

just thinking out loud?

Jan 17 04:08 AM