I hope this email finds you and your family well. Unfortunately I'm again not able to attend The Chart Seminar but plan to when it arrives back here in the States. Question, could you please comment on why you got short equity futures using Nasdaq futures instead of a much weaker market like Russell. I usually sell weakness and buy strength. Kind regards

Eoin Treacy's view

Thank you for this question which may be of interest to subscribers and I look forward to meeting up again at a future venue for The Chart Seminar. I agree that when one is looking for the end of a trend it is generally better to short the market which represents the epicentre of risk and is therefore the weakest. 

Right now I expect a reversion towards the mean. The Russell 2000 has led by simply ranging which has allowed the 200-day MA to catch up with the price, so I was unwilling to short it because I suspect a good deal of the downside has already occurred. 

I choose the Nasdaq because it still has a wide overextension. It has rallied for 11 consecutive weeks which is impressive but unsustainable beyond the short term. I wagered that the balance of probabilities is now that we are in for a more volatile period where the risks are on the downside as a reversionary period unfolds.