There is little guarantee for a swift turnaround in the QQQ
Awhile back we took a closer look at the technical setup of the broader market, and how the demise of the tech sector impacted exchange-traded fund (ETF) Invesco QQQ Trust Series 1 (QQQ) and ProShares UltraPro Short QQQ ETF (SQQQ) -- both of which are tracked by the Nasdaq-100 Index (NDX). Findings by our founder and CEO Bernie Schaeffer concluded that there was an amazingly diverse cross section of index ETFs on the "verge" of their 200-day trendline during this time period, while our Senior Market Strategist Chris Prybal noted that it’s going to be a 'tough, twitchy' year amid geopolitical unrest, a central bank combating inflation, and looming mid-term elections.
Much of this has already rung true as we approach May. Just this past week, Wall Street was abuzz over U.S. Federal Reserve Chairman Jerome Powell’s comments indicating bigger rate hikes (up to 50 basis points) might be coming next month, to counteract inflation. In response, as of this writing, both the NDX and QQQ are eyeing a third-straight daily drop.
In fact, as noted by Bespoke, the Nasdaq-100 has depleted past its year-over-year (YoY) breakeven mark, annihilating a 488-day streak that yielded positive year-over-year returns. This correction period doesn’t come as too much of a surprise, but it’s worth noting nonetheless. Bernie also noted earlier this week that the QQQ was down nearly 0.50% YoY.
To recap some of the technical trendlines we covered in our last mention of the QQQ, it looks like the 80-day has firmly solidified its presence overhead, halting several breakout attempts in late March. Meanwhile, the 500-day is just below the ETF, continuing to offer a long-term trendline of support. The 1,000-day moving average remains distant, however, offering little solace in the exchange-traded fund’s long and short-term progress.
Naturally, as we continue through the year and approach an impending rate hike from the Fed, there is little guarantee for a swift turnaround in the QQQ. However, it’s best to keep track of the long-term trendlines to gauge a broader outcome for when the year concludes, but until then investors will have to keep riding the wave of inflation and geopolitical tensions.
Subscribers to Chart of the Week received this commentary on Sunday, April 24.