Indices are at record highs

Indices are at record highs

Nobody even would be dare to say that such indices like SP 500, Dow Jones, or Nasdaq will drop in the long term. Its clear for everybody these well-known indices will rally up no matter what. Even Warren Buffet, one of the most famous investors, has advised his trustees to invest 90% of the money he will leave to his wife in a very low-cost SP 500 index fund.

This is good advice for newbies and risk-averse investors. However, if you are willing to take a higher amount of risk to increase the potential size of your profit, you should invest the larger part of your capital into stocks. Lets say 50% into stocks, 50% into indices (in this example we eliminate currency pairs and other assets).

Low risk or huge potential profit?

Anyway, almost every investor has stock indices in his/her portfolio as they have one key advantage. An index, especially the popular one like SP 500 or NASDAQ, is a low-risk investment as its an already diversified asset. If one stock loses its value, the other one will rise and offset the losses. Yes, the growth wouldnt be too fast as some individual stocks may offer, but you will save yourself from unexpected huge losses. Its a so-called trade-off.

What stock indices to trade in May?

US100 (NASDAQ 100)

US500 (SP 500)

DE30 (DAX 30)

JP225 (Nikkei 225)

EUR50 (Eurostoxx 50)

HK50 (Hang Seng)

Tech outlook of SP 500

US 500 (SP 500) has just broken the psychological level of 4200. Thus, the way up to 4300 is clear now. However, the index wouldnt grow fast to that price target, its likely to have struggled to move above the resistance zone of 4200-4250 as there is the upper line of Bollinger Bands, which the SP 500 has failed to cross many times. Besides, keep an eye on the RSI indicator. Once its above 70.00, it will signal the index is overbought and thus its likely to reverse down.

It should be interesting to trade SP 500 during NFP. If the report is better-than-expected, it may confirm bullish trends and help the stock index to rally up further. On the flip side, the poor NFP figures may worsen the market sentiment and trigger the sell-off of the index.

Indices are at record highs

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