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Trends & Analysis
News
Is Amazon a best-buy for the holidays?
News
China stocks end mixed despite PBoC announcement
News
Asia stocks rise on prospects of Fed easing hikes
News
HP joins the tech layoff spree
News
Will the euro give the bulls 200 reasons to smile?
News
Best Buy shares spike amid upbeat Q3 print

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Asset Watch

Will the NASDAQ 100 regain its leadership?

 

Thursday, October 20 2022

Thanks to inflation, a hawkish Fed and higher interest rates battering big tech, the NASDAQ 100 has materially underperformed the S&P 500 over the last two and a half months. However, Morgan Stanley’s Chief U.S. Equity Strategist Mike Wilson told clients that “we think 4,000 is as good a guess as any [for an S&P 500 bear market rally] and would not rule out another attempt to re-take the 200-day moving average (~4150).” So could brighter days be ahead?
Wilson also added, “…while that seems like an awfully big move […] the 200-week moving average… is hard to take out without a fight.”
While the S&P 500 remains ripe for a short-term rally, is the NASDAQ 100 a better play?

Historically, the NASDAQ 100 acts as a high beta version of the S&P 500, meaning the former rises and falls by more than the latter. And given the magnitude of the recent underperformance, the NASDAQ 100 offers relative value.

The NASDAQ 100/S&P 500 ratio ended the Oct. 18 session near its May and June lows. Back then, the NASDAQ 100 went on to outperform the S&P 500 for several weeks thereafter. Additionally, the ratio’s daily RSI hit a low of 32 in May, while the October low was 28 (the black circles at the bottom of the chart). Therefore, it’s more oversold than it was then.

As a result, does the NASDAQ 100 offer the best risk-reward when positioning for a Santa Clause rally?


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