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The New York Stock Exchange often called the senior exchange, partially because it has been the longest established and in part because businesses listed on that exchange have a tendency to be some of the biggest 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 area for merely smaller, speculative companies. While stocks of that kind continue to be found in this trading sector, lately, major businesses such as Microsoft and Intel, among others, have preferred to remain on Nasdaq instead of seeking a listing on the New York Stock Exchange. Several companies consider jointly listing on both Nasdaq and the New York Stock Exchange. Though the number of Nasdaq's larger companies listed is growing, Nasdaq-listed companies, as a cluster, 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, though, now often 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 directly correlated in the direction. The Nasdaq Composite Index tends to go up and go down at rates that are between 1.5 and twice that of the New York Stock Exchange Index. Correspondingly, the Nasdaq Composite Index is expected to decline more rapidly than the New York Stock Exchange Index throughout declining market periods.

Relative strength associations between the Nasdaq Composite Index and the New York Stock Exchange Index are regularly affected by the nature of public feeling regarding the stock market. While investors are confident about the economy and stocks, they are more prone to place funds into speculative growth companies and to take risks with smaller, promising corporations and technologies. When investors are reasonably negative about the economy and stocks, they are more likely to cluster investments into more established, stable, defensive corporations and to look for dividend return as well as capital appreciation.

The stock market yields superior gains during times 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 apt to perform best during periods when the Nasdaq Composite Index leads the New York Stock Exchange Index in relative strength. That is not to say that circumstances are essentially 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. However, these also are likely to be the periods when most serious market declines take place. Investments made during periods when the NYSE Index leads the Nasdaq Composite Index in strength are likely, 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 close of every trading week. After established, the standing of this indicator continues in effect for a full week, until the next computation takes place.

To generate 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 possess a tool that can automatically solve 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 ought to sit on the sidelines.

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