Dow Jones Industrial Average

On those days, the posted opening price on the Dow will be close to the previous day s closing price, and will not accurately reflect the true opening prices of all its components. Thus, in terms of candlestick charting theory, the Dow s posted opening price cannot be used in determining the positive or negative direction of the equities market. However, it should be noted that in recent times due to the advent of pre-market trading and the availability of Exchange Traded Funds, it has been commonly known that certain ETFs which replicate the movement of stock market indices such as the DIAMONDS NYSE: DIA, which tracks the Dow; provide a very accurate opening value for the average.

That is: where p are the prices of the component stocks and d is the Dow Divisor. Events like stock splits or changes in the list of the companies composing the index alter the sum of the component prices. However, the performance of the Dow continues to be influenced by not only corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm.

or 9:33 a.m. The average is computed from the Dow Jones Indexes by the stock prices of 30 of the largest and most widely held public companies in the United States.

Although the NYSE and NASDAQ both open at 9:30 a.m., not all stocks begin trading at that time, particularly if a stock has issued company news or has an order imbalance. When companies are replaced, the scale factor used to calculate the index is also adjusted so that the value of the average is not directly affected by the change.

Steel in 1907. - U.S. Of the original 12 stocks forming the Dow Jones Industrial Average compiled later in 1896; no longer railroad stocks, but purely industrial stocks, only General Electric is currently part of that index. - American Cotton Oil Company, a predecessor company to Bestfoods, now part of Unilever. - American Sugar Company, became Domino Sugar in 1900, now Domino Foods, Inc. - American Tobacco Company, broken up in a 1911 antitrust action. - Chicago Gas Company, bought by Peoples Gas Light in 1897, now an operating subsidiary of Integrys Energy Group. - Distilling & Cattle Feeding Company, now Millennium Chemicals, a division of LyondellBasell, now in Chapter 11 bankruptcy. - Laclede Gas Company, still in operation as the Laclede Group, Inc., removed from the Dow Jones Industrial Average in 1899. - National Lead Company, now NL Industries, removed from the Dow Jones Industrial Average in 1916. - North American Company, an electric utility holding company, broken up by the U.S.

As an example, if the ETF opens the trading session with a 76¢ loss; then that would strongly indicate roughly a 76-point loss for the Dow within the first few seconds or so, even before all of its components open for trade. Currently, there are also 3x Performance ETFs that exist too; such as those offered by asset manager Direxion through Direxionshares in conjunction with such indices as the small-cap benchmark Russell 2000 Index.

In addition, a $1 move in the smallest component of the DJIA has the same effect as a $1 move in the largest component of the average. The average is price-weighted, and to compensate for the effects of stock splits and other adjustments, it is currently a scaled average.

A summary of the more recent changes to the index include the following: The Dow Jones Industrial Average was founded by Charles Dow on May 26, 1896, and represented the average of 12 stocks from leading American industries. The value of the Dow is not the actual average of the prices of its component stocks, but rather the sum of the component prices divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index. Along with the NASDAQ Composite, the S&P 500 Index, and the Russell 2000 Index, the Dow is among the most closely-watched benchmark indices tracking targeted stock market activity.

Concerning equities, the exchange issues options contracts on DJIA ETFs, Inverse ETFs, Inverse Leveraged ETFs and Leveraged ETFs. To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a Divisor, the Dow Divisor. It is an index that shows how certain large, publicly-owned companies have traded during a standard trading session in the stock market.

The present divisor, after many adjustments, is less than one (meaning the index is larger than the sum of the prices of the components). Dow compiled the index to gauge the performance of the industrial sector within the American economy.

Early on, the initial divisor was composed of the original number of component companies; which made the DJIA at first, a simple arithmetic average. For example, a $1 increase in a lower-priced stock can be negated by a $1 decrease in a much higher-priced stock, even though the lower-priced stock experienced a larger percentage change.

However, there are no ETFs as of yet that attempt to replicate 3x performance (300% leverage) or (600% leverage by applying margin), against the Dow. The average is named after Dow and one of his business associates, a statistician, Edward Jones.

On days when not all of the components open at the start, the posted opening price of the Dow is determined by the price of those few components that open first and the previous day s closing price of the remaining components that haven t opened yet. In the case of 2x performance, the ETF increases the buying power by leveraging money without using margin.

In regard to using margin on a 2x performance ETF, that would result in leveraging an investment by 400%. Thornton .

Dow had composed an initial stock average called the Dow Jones Averages; which contained nine railroads and two industrial companies that appeared in the Customer s Afternoon Letter, a daily two-page financial news bulletin which was the precursor to The Wall Street Journal. stock market. Another issue with the Dow is that not all 30 components open for trading at the same time during the start of the opening bell.

Many of the biggest percentage price moves in the Dow occurred early in its history, as the nascent industrial economy matured. The 1980s and especially the 1990s saw a very rapid increase in the average, though severe corrections did occur along the way. The Dow averaged a 5.3% return compounded annually for the 20th century, a record Warren Buffett called a wonderful century ; when he calculated that to achieve that return again, the index would need to close at about 2,000,000 by December of 2099. Even during the height of the dot-com era, authors James K. Glassman and Kevin A.

Components of the Dow trade on both the NASDAQ OMX and the NYSE Euronext, two of the largest stock market companies. Presently, every $1 change in price in a particular stock within the average, equates to a 7.56 point movement. With the current inclusion of only 30 stocks, critics like Ric Edelman argue that the DJIA is not a very accurate representation of overall market performance; even though it is the most cited and most widely recognized of the stock market indices. Additionally, the DJIA is criticized for being a price-weighted average, which gives higher-priced stocks more influence over the average than their lower-priced counterparts, but takes no account of the relative industry size or market capitalization of the components.

Their theory was to imply that stocks were still cheap and it was not too late to benefit from rising prices during the Internet boom. The uncertainty of the 2000s brought on a significant bear market. Leather Company, dissolved in 1952. - United States Rubber Company, changed its name to Uniroyal in 1961, merged with private B.F.

Many critics of the DJIA recommend the float-adjusted market-value weighted S&P 500 or the Wilshire 5000, the latter of which includes all U.S. equity securities, as better indicators of the U.S.

market index after the Dow Jones Transportation Average, which Dow also created. Trading is typically carried out in an Open Outcry auction, or over an electronic network such as CME s Globex platform. The Chicago Board Options Exchange (CBOE) issues Options Contracts on the Dow through the root symbol DJX in combination with long term expiration options called DJX LEAPS.

ProFunds also issues Inverse Performance (NYSE: DOG) for a bearish strategy on the average. Alternatively, Alcoa and Pfizer are among the lowest priced stocks in the average and have the least amount of sway in the price movement.

Ultimately, there was widespread resignation and disappointment as the lows were revisited, and in some cases, surpassed near the end of the decade. Investing in the DJIA is made widely accessible within Equities through Exchange Traded Funds (ETFs) as well as in Derivatives through Options Contracts and Futures Contracts. Within the equities world, Asset Manager SSgA State Street Global Advisors, offers a family of ETFs the SPDRs; one of which attempts to match the daily performance of the index, the DIAMONDS, introduced in 1998 (NYSE: DIA). The Industrial portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry.

Another asset management firm, ProFunds, offers other related DJIA ETFs through ProShares such as the 2x (NYSE: DDM), which attempts to match the daily performance of the DJIA by 200% and the Inverse 2x (NYSE: DXD), which attempts to match the inverse daily performance by 200%. Although it may substantially increase the profit on an investment, it would however also expose an investor to a potential loss risk four times as great and possibly result in a margin call four times as fast.

Previously in 1884, Mr. The Dow Jones Industrial Average also referred to as the Industrial Average, the Dow Jones, the Dow 30, or simply as the Dow; is one of several stock market indices, created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow.

due to a delay. 3M · Alcoa · American Express · AT&T · Bank of America · Boeing · Caterpillar · Chevron · Cisco Systems · The Coca-Cola Company · DuPont · ExxonMobil · General Electric · Hewlett-Packard · The Home Depot · Intel · IBM · Johnson & Johnson · JPMorgan Chase · Kraft Foods · McDonald s · Merck & Co. · Microsoft · Pfizer · Procter & Gamble · The Travelers Companies · United Technologies Corporation · Verizon Communications · Wal-Mart · The Walt Disney Company Dow Jones Industrial Average (30 large stocks; popular indicator) · NYSE Composite Index (all companies on the NYSE) · Nasdaq Composite Index (all companies on the NASDAQ; technology-heavy) · NASDAQ-100 Index (100 large NASDAQ non-financial stocks) · S&P 500 Index (500 large companies; general market analysis) · Russell 2000 Index (small-cap stocks) · Wilshire 5000 Index (total U.S. Likewise, if the ETF starts the trading session higher by $1.12, then that would signal an approximate gain for the Dow of 112 points at the open, even if some components begin trading at 9:31 a.m.

market) Rupert Murdoch · José María Aznar · Natalie Bancroft · Chase Carey · David DeVoe · Arthur Siskind · Rod Eddington · Andrew Knight · James Murdoch · Lachlan Murdoch · Rod Paige · Thomas Perkins · Viet Dinh · John L. The introduction of 3x performance ETFs in connection with the DJIA may change in the future with further interest and demand from the investing public. In the derivatives market, the CME Group through its subsidiaries the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT), issues Futures Contracts; including the E-mini Dow ($5) Futures (YM), the DJIA ($10) Futures (DJ) and the Big Dow DJIA ($25) Futures (DD) which track the average and trade on their exchange floors respectively.

Goodrich in 1986, bought by Michelin in 1990. When it was first published, the index stood at 40.94, but ended up hitting its all-time low of 28.48 during the summer of 1896. Derivatives of the Dow trade on the Chicago Board Options Exchange and through the CME Group, the world s largest futures exchange company. The Dow Jones Industrial Average consists of the following 30 companies: The individual components of the DJIA are occasionally changed as market conditions warrant.

Hassett went so far as to publish a book entitled Dow 36,000. It is the second oldest U.S.

Of course, short selling and buying as well as shorting on margin, are allowed and not discouraged. That is, when the Dow trades in negative territory, the ETF trades higher; thus, making it not needed to sell short if one has a bearish goal in mind.

The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Characterized first by extreme fear on the part of newer investors, then by indecision on whether the following cyclical bull market represented a prolonged temporary bounce or a new long-term trend.

Securities and Exchange Commission (SEC) in 1946. - Tennessee Coal, Iron and Railroad Company in Birmingham, Alabama, bought by U.S. In these cases, in order to avoid discontinuity in the index, the Dow Divisor is updated so that the quotations right before and after the event coincide: The Dow Divisor is currently 0.132319125.

As of September 2009, IBM and Chevron are among the highest priced stocks in the average and therefore have the greatest influence on it.