Intermarket Trading Strategies

4

International Indices and Commodities

To conquer fear is the beginning of wisdom.

-Bertrand Russell

 

Before proceeding with intermarket correlation, and for the benefit of US readers, I thought it might be useful to say a few words about the international indices used in the next chapters. I presume that readers who have bought this book are familiar with the Standard & Poor 500 and the Nasdaq so I will start with European stock indices.

4.1 THE DAX

The leading index of the Deutsche Börse, the DAX (symbol: GDAXI) comprises of the 30 largest and most actively traded German equities (blue chips). The criteria for weighting the stocks in the index are trading volume and market capitalization. The DAX is a performance index, which means that all income from dividends and bonus distributions is reinvested into the index.

In addition to the DAX, the Deutsche Börse calculates a number of other indices, the most important being:

• The MDAX, which consists of the 50 largest companies from the classic sector of the Frankfurt Stock Exchange, that rank below the DAX components in terms of market capitalization and trading volume.

• The TecDAX, which consists of the 30 largest companies from the technology sector of the Frankfurt Stock Exchange, that rank below the DAX components in terms of market capitalization and trading volume. The TecDAX is equivalent to the US Nasdaq 100 index.

• The SDAX (small cap) which consists of 50 shares from the classic sector that rank directly below the ...