ANOTHER IDEA

The SPY has just blown through 130.5, the Pivot Point, and the next bands of resistance are at 130.8 and 131.20. Note however, how the QQQQ and the SMH are outperforming and even the NAZDAQ COMP is up 2/3% compared to the SPY .25%. Who would have thought that the Naz would outperform?.



Adam Warner at the Daily Option Report has an idea similar to my Long QQQQ Short SPY. His take, which is based on analysis from Jason Goepfert's at the Sentimentrader is as follows:

Last week, the BKX closed at a 2-month high on the same day the SOX closed at a 2-month low. What does this lead to?

Jason's findings:

"Over the past decade, this has been extremely unusual, as I show it happened only 3 other times......After those instances, the SOX had outperformed the BKX one month later each time, and by an average of nearly 13%.

Overall, market performance was mixed, so I don't think there's much we can read into this as far as a tell for equities in general, but in the past anyway the spread between the day had a tendency to narrow."

Adam's action:

"I am playing this spread small, leaning long in the SMH vs. short XLF. Kind of jibes with my opinions of the two right now anyway."

Note that the largest component of the SPY are the financials and as far as SMH, if they go up the QQQQ will generally follow.