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In the Decision Point Alert we track a Blue Chip Top 10 stock list, chosen from the list of 152 blue chip stocks we track on a daily basis. The ranking process is based on the stock's relative strength as measured by Decision Point's proprietary PMO (Price Momentum Oscillator).

I have observed this list over a long period of time, and my impression has been that the top stocks do exceptionally well when the broad market is rising, and extremely poorly when the broad market is in decline; however, I wanted to develop a more objective way on measuring the performance of these top stocks.

To do this I constructed a "Blue Chip Top 10 Index". This is done by calculating the daily change of the Index as being the daily average percent change of the securities in the Blue Chip Top 10 list. Stocks are tracked from the day after they enter the Top 10 list through the day they drop off the list.

The Top 10 Index is unweighted, meaning each stock in the list carries the same weight, so theoretically one could only replicate the performance of the list with real money by reallocating an equal amount to each stock each day (and somehow avoid transaction fees in the process). More to the point, the Top 10 list are a good place to look for securities that will out -perform the market, but it will be impossible for you to duplicate the Index. You could also lose a ton of money if you are long these top ranked securities during an extended market decline.

I have not been able to back test this index because of the large number of stocks involved, but I began collecting data on the Index in August 1999. Something else that is fairly obvious: It is very difficult to make money in these top stocks when the PMO for the Index has dropped below its 10-DMA. Watching the performance of Blue Chip Top 10 Index will tell you when it is a favorable time to work the stocks in the Top 10 list.

This chart is updated daily and can be viewed through the Daily Charts Menu.