friday trading, page-53

While we are on this subject, I thought I would just drop a little reminder that the XJO ( the title of this thread) was initially a capital weighted float adjusted value, which has been since adjusted by use of the divisor to reflect price changes in the constituent equities, which are themselves replaced, based on liquidity and capitalization grounds.

The Index is itself a technical indicator from which the value of a segment of the Australian market has been inferred, but only on technical grounds, because the index has no fundamentals, and the method of construction is designed to reduce the impact of the influence of any "fundamental" consideration in any constituent's valuation.

So from those of us who trade index derivatives(profitably), thank you ever so much for the advice that we will regret it. I seem to remember my father warning me about loose women on fundamental grounds when I was younger and thankfully I ignored him too.

I will leave you with this graphic of KAR, which has had it's stock price move between $4.50 and $12 like a yo yo for 18 months, which I think adequately demonstrates the point of the correlation between stock prices and perceived fundamentals. Was it the fundamentals which changed, or the perception? Either way I see no reason why I would choose to ignore $32 worth of movement and potential profit, just on the major swings, by being fixated on a theoretical valuation which the market refuses to abide by.