Thursday, June 19, 2008

Comparing The NASDAQ to the Dow Jones Industrials



Many of you have been sending me emails as to what my opinion is on the stock market. So to clarify what I'm doing in the market I decided to post the above chart.

Overall I've been bearish on stocks and I shorted DIA along with several other dow related stocks a few weeks ago. Last week I noticed strength in the NASDAQ so I bought QQQQ. So now I am short DIA and long QQQQ.

If you look at the above chart, you'll notice at the very top is a ratio chart of the NASDAQ vs the Dow Jones Industrials. A rising ratio line means the NASDAQ is stronger than the Dow, a falling line means the NASDAQ is weaker than the Dow.

As you can see the trend for this relationship (ratio) is up meaning NASDAQ is stronger than the Dow. This is exactly the reason why I am long the Q's and short the Diamonds. You'll notice the ratio line broke out to a new high today and as long as it keeps rising, my position will be making money.

I hope this post clears things up for many of you.

2 comments:

Cobra said...

It seems to you always have good idea, thanks, Kevin.

About DIA:QQQQ, can you zoom out a little bit like this URL:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2393449&cmd=show[s141838753]&disp=P

What your comments about this chart? Thanks again.

Kevin said...

That's an excellent chart...I'd have to say that chart is bearish for the market which comfirms my bearish view. Remember I am short DIA and long QQQQ. If the market sells off, I will leave on my DIA short position and exit the Q's. I like that chart, I may use that in a future post. Good work!

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