There is a lot of gloom and doom out there when it comes to the major averages. The truth is that these sideways trading market environments are extremely frustrating. This is the case for the bulls obviously, but even the bears sometimes when they get their faces ripped off in these vicious 1 or 2 day rallies.
But there is always a bull market somewhere. Pairs trades are one place to look when it seems like there is no where else to go. What’s working relative to something else? Today let’s take a look at the Nasdaq100. Since the low in June, $QQQ relative to the S&P500 has exploded. The fact that the S&Ps are loaded with banks probably doesn’t help their cause.
Take a look at the Nasdaq’s absolute performance with the $QQQ:$SPY ratio down below:
The Nasdaq was the first and only one of the major averages to get above its 50 day moving average. It was the first and only one to test its 200 day moving average. And it was the first and only one to get above its June lows. I added the trend line from the August lows to help with risk management, but I would look more towards the pairs trade that has continued to work during this frustrating environment.