Yesterday, I talked about this week’s volatility, with natural gas prices rising and inflation data on the horizon.
But there’s another interesting shift happening in the markets right now: the changing leadership between major indexes.
For a long time, the NASDAQ (QQQ) was the clear leader, outpacing both the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA).
But in this latest run, since about mid-July, we’ve been seeing something different. The Dow has been showing more strength, while the NASDAQ is lagging behind.
Not only did the Dow drop the least of the 3 indexes — about 7% as compared to nearly 10% for the SPY and 16% for the QQQ… But the QQQ reached its peak on July 10th — while the Dow didn’t hit its peak until July 18th.
What does this mean for us as traders?
Well, it could signal a shift in where the market is putting its confidence. Historically, when the NASDAQ leads, it’s a sign of a risk-on environment — investors are hungry for tech growth stocks.
But now, with the Dow showing strength, the market may be gravitating toward more stable, blue-chip names.
This doesn’t mean tech is out, but it’s something to watch. Leadership shifts like this could tell us a lot about where the market is heading, especially in times of uncertainty. And we’ve got plenty of that with the upcoming election and geopolitical turmoil.
If this trend continues, it might be time to start thinking more defensively and looking more seriously opportunities outside of tech.
Let’s keep an eye on how this unfolds over the coming weeks.
— Geof Smith
P.S. One thing I focus on — no matter what the market is going — is targeting weekly income from one of the most stable commodities in the market. Click here to see what I’m talking about.
