S&P vs Nasdaq Divergence — Full Breakdown & Transcript

[00:01] to the live. We have a volatile market here, but we do have a guest on the has joined us a couple times already, but I have never got to actually go back that. So we can go ahead and bring in Forest. Forest, what's going on,

[00:14] clear. >> Good, good. How have we been this week? It's been pretty crazy so far. We had a pretty crazy Monday, a pretty crazy Tuesday. How we holding up so far? How we doing?

[00:27] opportunity. So I think it's great for us as speculators, right? yeah, it's been a great week. >> Yeah, I know, I hear you 100%. You've necessarily trading them, but I know SpaceX reported yesterday. They beat

[00:41] earnings, and then we still ended up seeing a little bit more downside, so guess you could say yet, and we've seen some other pretty crazy moves with trade some of those binary events, or you kind of just let me see how the

[00:55] see how I might want to trade it? What kind of approach do you kind of take to >> I'd say they definitely are huge factors in the market, so I tend to take a weekly perspective. So in a week, I I care about how many important economic

[01:08] events there are. So I'm not necessarily trading earnings. And to be very, very clear, like I don't trade earnings in particular, but if a week is packed with like FOMC, CPI, and there's earnings, I expect maybe like larger magnitude on

[01:21] And so out of the weekly, every single day in my daily plan, all of that's going to account for that. So absolutely matters, and then absolutely, especially primarily trade futures, by the way.

[01:34] Those major like players, whether it's SpaceX, AMD, Nvidia, large tech companies, or any large company in general, is going to drive >> I got you. Yeah, I know we've seen a lot of a lot of volatility in those indices

[01:47] there. I think I had peeped that you like volume profile, right? I I I use a volume profile for most of my scalps, usually Nasdaq, S&P 500, you know, all that good stuff. Would you say that's a pretty similar style in which

[02:01] you kind of view the market through? >> I'd say you described how I trade to a T. Um So, yeah, I mean the only other thing I would layer in there is trend. So, very, very light technicals. Are we going up?

[02:14] Are we going down? Are we going sideways? But um yeah, auction market theory trader at my core, and then the way that I rationalize that is with the volume profile. And really I think of the volume profile as where are people's

[02:28] basis, right? As a trader, I know what my basis is. That's just my entry for anybody who doesn't know what that word means. I went long at, let's say means. I went long at, let's say 29 5 575. Cool. So, all of my decisions

[02:41] entered the market, and the volume profile tells us where everybody else entered the market. Um and based off of that, we could determine going to be. >> So, a little bit more context to the

[02:53] trades to kind of at least be able to I guess put into context all the data, all in the market right now. But I mean with that being said, we can go ahead and jump into this uh to the platform here. Uh take a look at a what's been going on

[03:05] in the market, and then after that, we can jump over to TradingView. Uh and little bit. Uh I know TradingView also has a TPO. I don't like to use TradingView for the TPO as much, but I think it's pretty solid. So, we'll have

[03:18] to check it out here uh in a second. But I mean with that being said, Q's up near the highs. This is one of the uh few times we've seen such a large divergence between Nasdaq and the S&P 500. Have you found that interesting, right? S&P's at

[03:31] all-time highs, Nasdaq kind of trailing behind, showing that divergence a little that? >> Yeah, it's it's actually really important. So, because they're both indices, and another way to think of an

[03:43] lot of people actually don't trade these for this reason, by the way. I'm on the Uh but because they're efficient, I think they're predictable. And so, when they're diverge or out of sync, it gives us a lot of intuition about

[03:56] what is likely to to occur next. So, if you're looking at, you know, uh QQQ, ES, NQ, the S&P 500, SPX, whatever the index is, because ES is at all-time highs, another way to explain that is that we're in

[04:11] at prices that have never been touched before, which means there's no volume up there. Nobody really has a a position up there, >> They literally don't. We're You just got there for the first time.

[04:24] that's not the case, and if you look at NQ, especially on the macro NQ, especially on the macro VP, um we're actually at like in the the volume profile. If you look at like the visible range going back a few weeks. Um

[04:38] so, what that means is is that NQ is kind of in this on the is that NQ is kind of in this on the macro uh equilibrium state, whereas you know, the S&P 500 is in uh pure pure price discovery mode. And so, what we're

[04:51] likely to see is basically what we're seeing today. We had a huge run-up on open Sunday to today, and now we're seeing some consolidation because NQ kind of got sucked into that whirlpool that is that major node there.

[05:04] And I suspect that ES might come off a little bit uh while NQ catches up. But, the next few days, uh we really got to see um this other index kind of get into uh that that same area, all-time highs as

[05:19] >> it's going to be a straight line up there, uh to be honest. I think we're going to see a little bit of maybe an N-shaped continuation or something like >> You know, you bring up a really good point about, you know, kind of framing

[05:32] that context around what the market might be trying to do right now. You just touched on how S&P 500 is at all-time highs. Nasdaq is not. You just touched on how we're trading at prices that we've never seen before. So, where

[05:45] buyers and sellers going to find that level of fair value? And it seems like we continue to float to the upside at ranges we've never been before so we can figure out, you know, where that new level of fair value might be, that

[05:58] of just touched on. And then like you just said, you know, Nasdaq's a little bit of a different story. We're trading below those all-time highs right now. Um so I've actually found Nasdaq, and I'm curious for you again because I know

[06:10] depending on the type of trader trader you are, you might like a different market better. Do you like Nasdaq better right now or do you like ES, right? ES I don't gravitate to as much, but the longs are a lot, quote unquote, easier,

[06:24] personality. There's not really a right or wrong answer. But what do you notice in your personality there, Forest? >> So the way that I trade is I always have >> Mhm. >> And I think of ES as the dog and uh

[06:37] >> Okay. >> Um so it's inherently more volatile, um which I think people struggle with, but I uh 100% agree. It's much easier to have a solid read on what's going to occur if you just focus on the S&P 500.

[06:52] >> Um Nas- Nasdaq is going to trail. It's going to be a lot more volatile, but in both indices, there's not a one-to-one correlation. They're very strongly juice, right? Even though they're both linear products, right? You get X amount

[07:06] of dollars per point. You're going to make more on the same move in a day trading the Nasdaq versus trading the same thesis on the S&P 500. So most of Nasdaq, but I will actually do my analysis

[07:22] >> Yeah. >> Um and again, those divergences, like divergences or where they diverge is really really important as a trader efficient products, right? >> Right.