The New York Stock Exchange often referred to as the senior exchange, in part because it has been the longest established stock exchange and in part because businesses listed on that exchange tend to be among the largest and most established businesses in the world.
Nasdaq, which has inferior standards for listing than the New York Stock Exchange, used to be considered as an market for just smaller, speculative companies. Even though stocks of that variety continue to be found in this trading sector, lately, major firms such as Microsoft and Intel, among others, have preferred to remain on Nasdaq rather than seeking a listing on the New York Stock Exchange. A number of companies consider jointly listing on both Nasdaq and the New York Stock Exchange. Even though the number of Nasdaq’s bigger corporations listed is increasing, Nasdaq-listed companies, as a group, tend to be more speculative, more technology oriented, and smaller in size than those listed on the New York Stock Exchange. The total daily trading volume on Nasdaq, however, now frequently surpasses the daily trading volume on the New York Stock Exchange.
The Nasdaq Composite Index and the New York Stock Exchange Index are inclined to be very much connected in the direction. The Nasdaq Composite Index tends to go up and drop at rates that are between 1.5 and twice that of the New York Stock Exchange Index. Similarly, the Nasdaq Composite Index is likely to drop more speedily than the New York Stock Exchange Index through declining market periods.
Relative strength relations between the Nasdaq Composite Index and the New York Stock Exchange Index are often affected by the nature of public sentiment concerning the stock market. When investors are positive about the economy and stocks, they are more prone to place capital into speculative growth companies and to take risks with smaller, up-and-coming corporations and technologies. When investors are more or less gloomy regarding the economy and stocks, they are more likely to cluster investments into more well-known, stable, defensive businesses and to search for dividend return as well as capital appreciation.
The Stock Market produces better gains during periods when the Nasdaq Composite Index leads the New York Stock Exchange Index in relative strength. That is true not just of the Nasdaq Composite Index. The New York Stock Exchange Index, the Dow Industrials, and the Standard & Poor’s 500 Index all are likely to perform best during periods when the Nasdaq Composite Index leads the New York Stock Exchange Index in relative strength. This is not to say that conditions are necessarily bearish when the NYSE Index leads in strength. Market action has normally been neutral when the NYSE Index outperforms the Nasdaq Composite Index. There are winning periods when the NYSE leads in relative strength. Still, these also are apt to be the periods when most dangerous market declines take place. Investments made during periods when the NYSE Index leads the Nasdaq Composite Index in strength are expected, on balance, to more or less just break even.
Now here are the steps involved in creating the Nasdaq/NYSE Index Relative Strength Indicator. These are carried out at the finish of every trading week. After established, the standing of this indicator remains in effect for a full week, until the next computation takes place.
To produce the Nasdaq/NYSE Relative Strength Indicator, you must divide the weekly close of the Nasdaq with the close of the New York Stock Exchange. Fortunately, we have a implement that can without human intervention accomplish this for us.
Using the Stock Charts website, you can separate two tickers by a colon to automatically divide the two. Enter compq:nya. Set the chart time frame on Weekly, and add a 10 period (week) moving average. That’s it!
When the line moves up, the Nasdaq is outperforming the New York Stock Exchange, and when the line moves down, the New York Stock Exchange is outperforming the Nasdaq.
If the Nasdaq/NYSE Index relative strength ratio stands above its ten-week moving average, consider the Nasdaq Composite to be leading the New York Index in relative strength. This is the time to buy or go long. If the Nasdaq/NYSE Index relative strength ratio stands below its ten-week moving average, consider the Nasdaq to be lagging the New York Stock Exchange in relative strength, which means you must sit on the sidelines.
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