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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 671.910.0%Nov 14 4:00 PM EST
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To: HairBall who wrote (62220)11/11/2000 2:10:39 PM
From: Lee Lichterman III  Read Replies (1) of 99985
 
>>how do you deal with what may seem to be diverging indices that address the same exchange or market segment. IE: NDX, QQQ, NQ00Z & COMPX<<

I think you just have to dig into what makes up each index and how they are weighted. I was going to buy some XLK a few weeks ago as a proxy to the NASDAQ but luckily pulled up the components and weighting for it. It seemed more weighted towards Semis and Telecom than the NDX was so I passed. I think the same is true of the QQQs versus the NDX etc. They are supposed to match as close as possible but without the exact proportions to the tracked index, disparities are going to be experienced. This can either be an advantage or disadvantage depending on what you are trying to do. In other words, if you want to short the NASDAQ but think Semis will get hurt the most and don't want to short the SOX itself, you could go with the XLKs. If you want to target the networkers but not the NWK, you pick the QQQ etc. ( Note I am only throwing our general examples and am not advocating these approaches specifically). As for the NDX versus the NASDAQ, that is simply the skewing due to the smaller caps in the NASDAQ versus the Mo Mo favorite top 100 in the NDX. The smaller Biotechs were strong causing the NASDAQ to hold up slightly better than the NDX recently. Of course this is all JMHO.

Good Luck,

Lee
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