Invesco QQQ and Nasdaq-100 Evaluation

U.S. inventory markets appear to be reaching new all-time highs on a weekly foundation. The NASDAQ 100 index can greatest be traded and adopted utilizing probably the most energetic exchange-traded-fund (ETF), the Invesco QQQ NASDAQ: QQQ. The pc and Technology sector corporations dominate the QQQ. Whereas the markets are trending upward, a rising tide would not essentially carry all boats. Critics argue {that a} handful of corporations dominate the market, impacting benchmark indexes disproportionately. Traders’ burning query stays: “The place does IT go from right here?” Let’s look at the QQQ to discover potential strikes.

What’s the QQQ Index?

$462.96

-0.41 (-0.09%)

(As of 06/7/2024 08:52 PM ET)

52-Week Vary

$342.35

▼

$465.74

Dividend Yield

0.52%

Property Underneath Administration

$274.81 billion

The QQQ tracks the motion of the Nasdaq-100 index, which is comprised of the 100 largest non-financial companies listed on the Nasdaq alternate. This modified weighted index relies on market capitalization (market cap). This implies the extra a inventory is valued primarily based on its market cap (calculated by value x excellent shares), the extra IT will impression the worth of the index.

The index could also be rebalanced quarterly or yearly when the weighting is simply too concentrated. Technically, when the combination weight of its shares with weightings over 4.8% exceeds the 48% threshold, the Nasdaq could conduct a particular rebalancing like IT did on July 24, 2023.

The Dominance of Prime 3 Holdings within the QQQ Index

Nevertheless, as of June 7, 2024, the highest three holdings, together with Microsoft Co. NASDAQ: MSFT with 8.47%, NVIDIA Co. NASDAQ: NVDA with 8.12%, and Apple Inc. NASDAQ: AAPL with 8.08% allocation make up practically 25% of the entire index. This isn’t an remoted challenge simply to the Nasdaq 100. The truth is, the highest three holdings within the S&P 500 index are Microsoft at 7.06%, Apple at 5.71%, and NVIDIA with 4.66% allocation for a complete of practically 16% of the index.

How Nvidia Strikes the Markets

The unreal intelligence (AI) increase has surged Nvidia shares into the stratosphere, rising its market cap to just about $3 trillion. The truth is, on most days, if NVDA inventory is surging, there is a good probability that the markets are rising. IT‘s not simply the rising worth of NVDA inventory but additionally the domino impact of chief shares pulling up the laggard shares. IT solely is sensible that traders and merchants need to bounce into the “subsequent” inventory that can transfer in sympathy.

For instance, Nvidia’s rise tends to rally semiconductor and AI shares like Utilized Micro Units Inc. NASDAQ: AMD and Tremendous Micro Pc Inc. NASDAQ: SMCI. Anticipation of the 10-for-1 inventory break up occurring on June 10, 2024, drove up shares, which impacted the rise within the QQQ to file highs.

QQQ Producing Stairstep Bull Flag Breakouts  

The weekly candlestick chart on the QQQ illustrates stairstep or back-to-back bull flag breakout patterns. To calculate helps, we utilized Fibonacci (fib) retracement and extension ranges primarily based on the sequentially larger market construction lows (MSLs), offering an upside goal primarily based on the seed wave breakout formation.

The fib plots had been made at $342.35 on the MSL and $449.39 in the marketplace construction excessive (MSH). This leads to upside targets primarily based on the fib extensions of 1.27, 1.414, and 1.618 potential reversal zones (PRZ). Upside targets are $478.22, $493.63, and $515.46. Every of those ranges has the potential for the value to reverse for a pullback and even reverse the uptrend.

The weekly relative power index (RSI) is coiling once more in the direction of the overbought 70-band stage. Key fib pullback help ranges are at $437.14 (0.886 fib retracement), $408.47 (0.618/0.382 fib ratios), $383.22, and $342.35 swing low. 

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