On Friday, CNBC’s Jim Cramer told investors to avoid Nasdaq Composite stocks and place their bets on names listed in the Dow Jones Industrial Average.
«Even though tech started the new year well and it was crazy today, the rankings, as interpreted by Larry Williams, say be a little wary of the Nasdaq show horses and bet on working horses in the Dow,» he said.
Stocks rose on Friday to end a positive week for all three major indexes. The Nasdaq has climbed 11% this year as investors bet on less aggressive interest rate hikes from the Federal Reserve.
To explain Williams’ analysis, Cramer looked at the Nasdaq-100 daily chart from November 2021.
While some technicians think it’s a bullish sign that the index has broken above its 200-day moving average over the past two days, Williams points out that the Nasdaq-100 has come back down after breaking above the level in the past, according to To screw up.
He then reviewed the daily Dow chart dating back to February 2022.
Unlike the Nasdaq-100, which Williams says is a «show horse» index because of the interest in it, the Dow Jones is more representative of Main Street, Cramer said.
He added that the blue-chip index broke above its 200-day moving average in November and has remained above it ever since.
«Williams finds this graph much more compelling,» he said.
For more analysis, watch Cramer’s full explanation below.