This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Joshua Brown


Curated by Joshua Brown, The Reformed Broker

Side Street

View From the Blogs

The Nasdaq Catch-Up Trade

Posted on 01/23/13 - 10:53 AM EST

This past weekend in my Macro Week in Review/Preview for clients I noted that for the second week in a row the markets looked bullish but with the Nasdaq 100 ( QQQ) lagging the S&P 500 ( SPY), and Russell 2000 ( IWM). In fact it is also lagging the Dow 30 ( DIA) and Dow Transports ( TRAN). If you take a look at the performance chart below since January 2nd the Nasdaq has been moving sideways while every other index has been rising. There is no rule that says that this

cannot persist, but like the stubborn little kid that does not want to follow the rest of the family, when left alone long enough it will likely try to catch up. So how do you prepare for this to happen? Well there are several ways. The simplest is to just prepare to buy the ETF $QQQ when it breaks the range over 67.50. But you could also reduce some risk and play it as a pairs trade. Sell one of the indexes that has been a high performer on a dollar for dollar basis against a long position in the


$QQQ looking for a mean reversion. Or if that is too much trouble managing two positions, use options and buy calls in the $QQQ to limit your risk to the premium paid and at the same time increase your leverage to an upside move. With IBM and Google both reporting Tuesday night and Apple due to report Wednesday after the close, the timing seems right.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Top Rated Stocks Top Rated Funds Top Rated ETFs