Volatility doesn’t have to mean uncertainty with this secret technique — LIVE at 1 p.m. ET
As we analyze the current state of the markets, one theme stands out — disparities between the major indices. The Dow and the Nasdaq are in a tug of war, each pulling market sentiment in a different direction.
While the S&P 500 ETF (SPY) remains range-bound between $570-$609, understanding the relationship between these indices is critical for predicting the next big move.
The Nasdaq 100 (QQQ) has been a consistent leader in past rallies, with its heavy weighting in tech stocks driving outsized gains. However, QQQ is showing signs of exhaustion, stuck in a series of lower highs and lower lows.
While it remains above major moving averages, the lack of upward momentum signals caution. This disparity between QQQ’s previous strength and its current stagnation suggests the broader market may be searching for a new leader.
Enter the Dow Jones Industrial Average.
The Dow has been playing catch-up, recently breaking above its 50-day moving average. This strength in Industrials and other blue chip names suggests that the market is broadening out.
However, the Dow still lags behind the Nasdaq in terms of longer-term performance, and the question remains whether it can sustain this momentum.
When we look at the equal-weighted S&P 500 ETF (RSP), it paints an eerily similar picture to the Dow — steady improvement but not yet enough to ignite a breakout.
This lag in broader participation adds to the uncertainty. Until we see synchronized strength across all major indices, the market is likely to remain range-bound — or choppy.
Earnings season could play a pivotal role in resolving this tug of war. Companies in both indices are starting to report, and their results could determine whether Tech retains leadership or Industrials and value stocks take the reins.
The breadth of the market — meaning how many sectors and stocks participate in a rally — will be key to determining if this divergence resolves to the upside.
For traders, the takeaway is clear…
Pay attention to both indices. If the Nasdaq breaks out of its current channel of lower highs and lows, it could reclaim its leadership role. Conversely, if the Dow continues its upward trajectory, it might signal a shift toward value and cyclical stocks.
In the meantime, patience is critical.
Watch the levels closely and let the market show its hand before making directional moves. With earnings underway and catalysts on the horizon, this tug of war could resolve sooner than expected.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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