PRACTICAL APPLICATIONS

CHECK CURRENT GAIN/LOSS PROSPECTS FOR THE MARKET

By combining the price-range forecasts for the component stocks of an index in the same way that the index is constructed, we can produce the block traders' equivalent of a market forecast.

To see 's picture of how high and how low some major stock indexes might go:

• Login as a member.  If you are not yet a member, please log in as our guest by registering for the free 30-day trial membership.
  
  
• Logging in brings you to the main menu page.  To view the current market thermometer, click on the button.

The lower and upper ends of the probable price range for the (big-cap) Dow-Jones Industrials Average are marked by double lines across the left-hand thermometer. The same is marked for the (small-cap) Russell 2000 index on the right. 

Current market prices for these indexes are indicated by the red levels, giving a sense of upside and downside proportions between there and the double-line forecast extremes.

Between the two thermometer bulbs is a scale measuring those proportions, calibrated in Reward:Risk ratio units. The idea behind this scale is illustrated below the Thermometers. The proportion of upside to downside gives a qualitative measure of attractiveness, ranging for a buyer from 100:1 as best to 1:100 as worst. Market indexes are getting underpriced outside of 5:1.

This same notion of upside vs. downside provides the means of directly comparing stocks of widely differing underlying companies. To see such a comparison:

• Click on at the bottom of the Thermometer page
  
  
• At the Product Menu click on

This will bring you to a Risk:Reward (R:R) Chart of the Dow Jones Companies.