Stock Market Indices are mathematical constructs used to describe markets. Although some indices are weighted differently, majority are computed by measuring the weighted average of their set. Stock market indices can be used to describe a section of the market or encompass the whole. How you use them largely depends on your preference and goal. I prefer to use them as indicators to time my entries and exits enabling me to optimize my profits and losses.
One method I like to do is to segment the top earners of each sector and industry per month for the past trailing year. This method allows me to pick winning companies since I'm always investing into winning sectors and industries. The likelihood of me losing money is also greatly diminished whenever the company I select goes sour. The illustration below identifies the current leading sectors per month for the past trailing year.
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