For many first-time investors, some financial market terminology can be confusing. A question that often crops up is ‘what is the difference between the Nasdaq and the nasdaq100?’. Effectively this question can be answered by defining the difference between a ‘Stock Exchange’ and a ‘Stock Exchange Index’.
A Stock Exchange is a marketplace where the buyers and sellers of company stock (aka shares) can transact.
The owners of Stock Exchanges oversee that the companies whose stock is listed adhere to rules that ensure fair market conditions for buyers and sellers. In short, they make sure that companies are continually disclosing information that buyers and sellers would deem necessary to make informed financial decisions regarding the buying, holding, or selling of stock.
The organisations that oversee Stock Exchanges earn the bulk of their revenue from transaction fees. In fact, Stock Exchange companies can be incredibly lucrative. In 2020, the largest Stock Exchange in the world, the New York Stock Exchange (NYSE), generated US $50.9 billion in revenue. The next largest Stock Exchange in the world, the Nasdaq, generated US $5.6 billion in revenue in the same year.
Interestingly, many organisations that own exchanges are themselves listed on exchanges. The owner of the NYSE, Intercontinental Exchange (NYSE: ICE), can be found on none other than the NYSE. The owner of the Nasdaq, Nasdaq Inc (NASDAQ: NDAQ), is, of course, listed on the Nasdaq.
A Stock Exchange Index is a way to measure the stock performance of companies listed on Stock Exchanges. Companies can be grouped by size, industry, or several other categorisations.
The performance of the companies in an index informs the performance of the index. Essentially, if the share price of the companies in the index are rising, so will the index.
A Stock Exchange Index may measure the entire Stock Exchange or only a section of the Stock Exchange. For example, the Nasdaq 100 measures the performance of the largest 100 companies that are listed on the Nasdaq. The Nasdaq Composite is a similar Stock Exchange Index, except this Index does not discriminate. As such, the Nasdaq Composite is representative of all 3,700 companies listed on the Nasdaq.
The USD has enjoyed a decent level of upside against the Canadian Dollar since the end of May 2021. This is visible in the D1 timeframe. In this time, the Loonie has travelled from 1.202 to 1.255 per USD.
In the channel that it is currently caught, the CAD reached a low of 1.280. This low occurred at the beginning of this week, intraday Monday.
It appears the USD got a little ahead of itself, and once the pair closed higher than the 200MA, it set out to quickly correct itself. Since this time, the Canadian Dollar has strengthened by 2.5 cents, with the USD closing lower for the past three days.
Channel support currently holds between the 61.8% and 50.0% retracement as of June 23 (Asian session).
On the shorter time scale, H4, we can see that Canadian Dollar bulls have tested the 1.252 price level. The rejection at this level might indicate that the bullish impetus that the CAD held earlier in the week has begun to run itself down. For one thing, WTI Crude/Brent Oil prices have settled down. Barring more conflict among the OPEC+ members, the price of Oil should affect the USDCAD pair a little less moving forward.
Keep an eye on US stocks and the possibility of another big selloff. Much like that experienced on Monday this week, where the SPX500 dropped ~100 points. If the SPX repeats this situation, expect the CAD to be denied a pass down through the 1.252 price level in the short term.
US stocks have been on a three-day run with impressive earnings reports, injecting a buoyancy to the markets.
Friday’s earning reports are not as interesting (from a media perspective) as those dropped earlier in the week. On Friday, we will be keeping an eye on American Express (NYSE: AXP) and Honeywell International (NASDAQ: HON). However, the market at large it probably the better target of your focus on Friday. It will be interesting to see if the market euphoria carries into the close of the week, or if fatigue sets in, and US indices finish the week in red.