Tuesday, November 27, 2007

Keep An Eye On The Nasdaq

Lately the Dow and the S&P have been falling down rapidly but if you look at the NASDAQ you will see a different story..

Above is a line chart of the NASDAQ and the S&P. I don't usually use line charts (which are based on closing prices) but I wanted to show how the S&P got down to the close from last August. If I had used a bar chart you wouldn't have noticed this because of the spike low on that particular day in August.

Notice how the S&P tested the low from last summer while the NASDAQ is way above last summer's low. In my opinion this tells me that the NASDAQ is much stronger than the S&P and even the DOW (not shown). If you've been a reader of my blog for any length of time, you would know I always look to position myself in the strongest stocks and indices/groups. I never buy the laggards with the hopes that it will play catch up.

I'll be watching the NASDAQ in the days to come for a possible buying opportunity. If I do anything I will post it here the day I buy the Q's or short the QID's. Right now I'm just going to be patient and let the market do what it is going to do. If the NASDAQ breaks down from here, I will do nothing, but if I see the NASDAQ begin to rally a little bit more, I'll be all over it. I'm looking to buy strength not weakness. We'll see what happens.


michael said...

hi kevin, just wanted to say i've enjoyed your blog since i found it. Your comments are very educational and useful. What is your background in investing if you don't mind me asking.

Kevin said...

HI Michael,

I've been involved in the financial markets for about 18 years.. I started out trading commodities on the trading floor and then shifted over to trading stocks in 2000. Thanks for the nice comments.

CHRIS said...

Hi Kevin,

CHRIS said...

Hi Kevin,
Two questions and a comment. First, a big thanks for your informed insights on the markets. I'm glad I found your blog. Keep up the great work. My first question is why you don't trade commodoties any more, as the returns seem to be higher (but also the risk I assume). Also, do you not short the market at all? (I'm a more recent reader for excuse me for not searching all the past blogss). Also, what do you think of playing world curreny options, as say a call on the Canadian dollar to rise against the US dollar, as shown here:

Keep up the great information.

whisper said...

Great observation.

I bought some calls last thursday on XLB, partially because the materials spider was much stronger than the 500 during the recent decline.

Kevin said...

Hi Chris...

I still trade commodity futures once in awhile, but for the most part I'll trade the ETF...For example if I want to buy gold, I can buy GLD. The leverage is less but so is the risk...

You also asked if I ever short the market...Of course I do but only in a bear market will I short. We are in a bull market so I am a buyer of dips...Thats how you make money in bull markets, you look for reasons to buy on pullbacks.

No opinion on canadian dollar calls....thanks for reading...


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