Using the price weighting characteristics of the index, the classic example would be to position 28 or 29 of the 30 to go lower while one or two of the highest-priced components went higher, offsetting the lower priced decliners and concealing the developing weakness.
When the trap was sprung the high-priced stocks were whacked, the message went out across the wires and the decline could be counted on to feed upon itself as the yokels out in the hinterland saw the tape.
With all that background we are about to go in a completely different direction, one where Apple was able to artificially enhance the DJIA performance on the way up due to its outsized impact as the highest priced component in the index. But now, after the split, the same percentage move to the downside by AAPL will have only one-quarter the effect on the DJIA.
What it means is: the index can now move opposite AAPL's stock price, something that would have been very difficult as recently as last week..
Shifting gears once again, yesterday's price action in Apple looked as though it was going to set up a weak reversal pattern, the "Hanging Man". However, today's action showed that to not be the case as the stock traded higher than Tuesday's high but in doing so it created another reversal pattern, a bearish engulfing day where today's candle trades both higher and lower and closes lower.
In a rising market this type of reversal is not all that profitable as the reversal itself tends to reverse (much more reliable in a declining market) but makes for an interesting situation where the DJIA can move up while the formerly highest weight goes its own way.
With an hour-and-a-half to today's close here's the last thirty days of candles for AAPL:
Via BigCharts, on blogroll at right.
