Trade idea: short US500/long NAS100
With US Q1 earnings in mind (read our preview here), one interesting trade for those who feel tech is going to outperform the S&P500 is to look at ratio analysis. Here, I’ve used Trading Views's charts, and the ability to divide one index by another – in this case the S&P500 is the numerator and the NAS100 the denominator – the fact the ratio is headed lower details that the NAS100 is outperforming the S&P500. I can trade this by taking a long position in the NAS100 and short in US500, making sure the USD notional exposure is the same."
As we see the ratio is starting to roll over and the expectation is tech earnings will be strong - if married with lower US bond yields should see this trade work.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.