As a trader I use three markets to check for harmony: S&P 500 (SPY), Nasdaq 100 (QQQ) and Russell 2000 (IWM). If these three are moving up together (SPY, QQQ and IWM) then there is market harmony.
Key Question
As of June 2014, the QQQ and SPY are at yearly highs but the chink in the armor is that IWM is lagging behind and is negative on the year. So the question I pose is, “Can the market’s SPY and QQQ continue to run higher without the IWM?”
The following two scenarios will play out. Either the IWM will play catch up to the SPY and QQQ and the market will gain harmony and continue its pursuit of new highs into 2014; or the IWM will continue to push lower giving some head winds to the SPY and QQQ. If the latter case plays out, the market will have a bigger pullback this summer.
Trading Advice
Here’s my advice on the swing trading front. Stick to stocks making new trend changes up or down. There are plenty of stocks on their own page right now. For example, in our swing newsletter we are short WFM and TJX both trailing in the money. There is money to make long and short just be stock selective.
