It is no secret that the trading this year has been difficult. I really thought after a covid and election year it would get easier but it has only gotten harder. I think this is because of the strength of the dollar since the first of the year.
IF.... I said if the dollar cycle is allowed to roll over into a left translated cycle and drop below the IC trend line, I believe the trading will become MUCH easier for the next 6 months. Hang in there. That applies to virtually everything we trade, including the stock indexes.
First it was the Dow. Then the S&P and Russell. Last week it was the Nikkei. I think it is about time for the Nasdaq to catch up.
The 10 dma turned higher days ago on all the Dow, S&P and Russell. The 10 dma turned up yesterday on the Nikkei. All of the other indexes are well above the 50 DMA. Once the NASDAQ can break through the 50 it will catch up in a hurry.
The ES, NKD, Dow and Russell are all well above the 50 DMA. In fact, only the S&P ever closed below it. The NQ has been very difficult to trade, with tech stocks being so highly valued during this pandemic, which is why we recommended trading stocks in the Russell. We still like the Russell but the Nasdaq should become much easier to trade as it catches up to the other indexes.
,A trader asked me to explain why we were recommending Russell trades now instead of NASDAQ. While we believe as most of our traders, that the most potential lies in NQ for the next few month, little matters if you cannot hold on to your position.
I have attempted to show the price action of the RTY vs the NQ since the September low. Each of those big wiggles in the NQ can knock you out of a profitable trade. Notice how much smoother the RTY is. The RTY would be the easier position to hold on to.
The other advantage is that the margin required for a RTY is $7,150 vs $17,600 for the NQ. Also, since last years sell off, the RTY has considerably out performed the NASDAQ.
It has become clear to me that most of the traders I work with should stick with the Russell from here on out because I do not see this volatility getting any better in the NASDAQ.
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