Stocks went on a tear the last seven weeks with Nasdaq 100 stocks leading the charge. The S&P MidCap 400 SPDR (MDY) and Russell 2000 ETF (IWM) gained more than QQQ over the last seven weeks, but QQQ is still the only major index ETF to exceed its 2021 high and record a new all time high. Chartists looking for momentum leaders should still focus on the Nasdaq 100.
The chart above shows QQQ with two leading uptrends (green arrows) and IWM with two trading ranges (blue arrows). IWM looks poised to break out of its 18 month trading range, but it remains well below the November 2021 high. In short, QQQ shows much more “trendiness” than IWM and I would stay with QQQ.
Picking a focus index is important for momentum strategies. I have tested many strategies using large-caps, mid-caps, small-caps and Nasdaq 100 stocks. S&P 500 and Nasdaq 100 stocks outperformed on a risk-adjusted basis because small-caps and mid-caps strategies generated excessive drawdowns. Small-caps are simply not worth the hassle, IMHO.
TrendInvestorPro runs momentum rotation strategies that trade stocks in the S&P 500 and Nasdaq 100. These strategies use trend indicators to find uptrends and a ranking indicator to identify the leaders. The idea is to buy the top ten and sell when they drop out of the top twenty. Some of this week’s leaders include META, NVDA, CRWD, ADBE, MSFT and AVGO. See CandleGlance chart above.
Check out TrendInvestorPro to learn more about our momentum-rotation strategies and the performance metrics. We also have a chart trading strategy with setups featured every Tuesday and Thursday. Click here to gain immediate access.
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Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
