MarketTrak Question/Comment Message


Posted By: darius antia   Date: Tue Aug 14, 2012

Title: Russell 2000

Message:
  I am a new subscriber. I generally day trade or swing trade. Today's 8/14 forecast of LONG for tomorrow has me a bit confused. I understand why the 5 day slope is positive for the SP-500, however I am trading TZA (3x inverse Russell 2000)and my reading of the Russell 2000 and possibly the market is that it will be down the rest of the week. Is there a correlation between the Russell 2000 and SP-500 for ANO?

Response:
  The ANO is used mainly for the DJIA and the SP500. The degree that it can be used to predict other market indices depends on the correlation coefficient between the DJIA and the index of interest. For the Russell 2000, the correlation coefficient is around 0.91 which means that the DJIA and the Russell 2000 move generally in the same direction but you should not expect to see the same percentage change on a daily basis. Trading the ultra 3x shares is very risky and I do not recommend using the forecast for this purpose.

  Click here for some interesting data.

 

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