Email of the day
Comment of the Day

October 21 2010

Commentary by Eoin Treacy

Email of the day

on choosing to open a Nasdaq short:
"Yesterday you reported - short position opened Nasdaq 100. I wonder if you are prepared to elaborate on why NASDAQ and not Dow or S&P?"

Eoin Treacy's view Thank you for this question which may be of interest to other subscribers. Technology has been one of the best performing sectors over the last few months, benefitting from the weakness of the US Dollar and demand growth from the expansion of the global middle class. As a result, the Nasdaq is somewhat overextended relative to the 200-day MA and I suspect more susceptible to a reversion than either the Dow or S&P. Something akin to a catch-up move is underway for some lagging large cap markets making short positions a riskier proposition.

An inverse correlation has been evident between the weakness of the US Dollar and so called 'risk assets'. With Tuesday's upward dynamic for the US Dollar, I was betting, in shorting the Nasdaq, that the Dollar would follow through to the upside and initiate a more substantial profit taking in the stock market. As it stands, this view is looking perhaps a bit premature but I am willing to hold if for a while longer.

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