How about plotting a ratio chart of Sensex/Dow. I just produced a weekly chart of Sensex/Dow ratio chart for . From the chart
we could infer that increasing ratio's favor Sensex to Outperform Dow and declining ratio's favor Dow to outperform Sensex
Sensex Outperformed Dow in two durations
from Aug 2007 to Jan 2009
from Nov 2008 to June 2009
Dow Outpeformed Sensex
from Jan 2008 to Oct 2008
Will Dow Jones Outperform Now???
Now the question in my mind is will Dow outperform Sensex. Note: Outperformer does'nt denotes who is going
to be a top gainer. Its all about who is the best performer among the two. Currently on week on week basis
sensex is trading at the ratio of 1.72x-1.73x of dow jones. And from the RSI-5 period indicates the weekness in the ratio
and likely the ratio's could drop in coming weeks. i.e Dow to Outperform Sensex on weekly basis.
Few Points
1) If Dow is trading at 8447 then the fair value of Sensex is 8447x 1.73 = 14613
2) Decline in Dow will hugely affect the Sensex Performance as the ratio's are very high(1.72)
3) Daily Sensex/Dow ratio's shows a strong Negative divergence pattern(Not presented here)
4) High Correlation between Dow Jones and Sensex (Check out the charts from reutersindia.net ) shows that
high correlation between sensex and Dow Jones