Page 179 - THE MARKET WHISPERER

THE MARKET WHISPERER 17 5

on Apple’s stock price will be more significant than on shares of Ford [F]
when it announces a new model. A volatile index cannot necessarily be
relied upon, therefore the NASDAQ 100 is given second place in the list of
important indices, but its second place is by virtue of its volatility.

As noted, 60% of market movement is dictated chiefly by the S&P 500.
Therefore, it is important for me to analyze index direction. Since the
NASDAQ 100 is more volatile than the S&P 500, the NASDAQ index will
often indicate the expected direction before the S&P. As an example, let’s
assume that the NASDAQ 100 breaks out first to a new high. Does that
mean the stock I bought will also reach a new high? No. As we learned, it
will move chiefly according to the S&P 500 rather than the NASDAQ 100,
but the NASDAQ breakout may certainly hint at the direction that the S&P
500 will take. To summarize: an early NASDAQ 100 breakout causes me to
suspect that the S&P 500 will follow suit. The NASDAQ 100 early breakout
is often like an advance warning system of what will happen with the S&P
500.

NASDAQ 100 Symbol

The NASDAQ 100 symbol is NDX. As with the SPX, it may appear on your
charts with a $ sign before, after, or absent from the symbol: NDX$, NDX,

or $NDX. If one of these symbols does not match your trading platform, use

the symbol search field to find the symbol by entering this term: NASDAQ
100.

The NDX, like the SPX, is not a traded index, which means you cannot

see its volume. It moves only during trading hours, as it is computed based
on the price of the 100 stocks that comprise it and are traded in real time.

NASDAQ 100 ETF: QQQ

The NASDAQ 100 NDX index is not a tradable index, but many individuals
are interested in linking their money to NASDAQ 100 yields (which is very
dangerous!). As a result, the ETF (Exchange Traded Fund) came into being.
It tracks the NASDAQ 100 and is known as “the Q’s” or by its familiar
symbol, QQQ.

As with the ETFs for SPY, which track the S&P 500, the QQQ is also

traded as though it were a stock. It has its own symbol, buyers and sellers.
Being a traded ETF, many traders prefer tracking the Qs than the NDX,
because with ETFs, “money talks.” ETFs are more sensitive to changes in

supply and demand, and a displayable volume is created.