The Nasdaq Composite could be a key index for the remainder of the year. For a while now, we’ve had a lot of momentum type names, within this index, lead the market higher. I’m talking about names such as LinkedIn (LNKD), Netflix (NFLX), Priceline (PCLN), Tesla Motors (TSLA), and (of course) Facebook (FB).
Sometimes traders like to use a few types of stocks to get a “feel” for the market on a shorter-term basis. When you have traders/investors pouring money into these names, and they seemingly go higher every day, it can indicate that the risk on scenario is still in play.
Just last Tuesday (10/8), my colleague noted how momentum stocks in the market were plunging. This was a brutal day in the market, as the S&P sold off sharply. Technology stocks got absolutely obliterated, and all of the aforementioned names had huge down days. It was certainly a worrisome sign.
However, for the remainder of the year, the Nasdaq Composite (chart of the index below) could be the leader. Given that these momentum plays have bounced recently (along with the rest of the market), it’s quite possible that technology could lead the charge into January. This could be especially true if we get any clarity out of Washington. I’m not saying that these momentum plays are the key, but I am keeping a close eye on them and will continue to get a “feel” for this market as best I can. Paying attention to how high beta stocks are performing is a good way to gauge if there is a healthy appetite for risk.
Good luck trading out there.