Despite the uncertainty prevailing in the markets, the Nasdaq 100 Index ($NDX) has proven resilient, perhaps more so than its peer benchmarks. The 90-day trade truce between the U.S. and China, initiated in May, boosted investor confidence. Yet that’s now at risk amid mutual accusations of violations.
Nevertheless, markets rallied on Tuesday morning after news that April job openings, one of a few key reports leading up to Friday’s jobs report, were better than expected. Still, signs of weakening demand, rising deficits, and declining CEO confidence suggest the economy remains fragile.
Why QQQ May Be Worth Watching Right Now
In light of the current environment, is it worth adding positions to Invesco QQQ Trust (QQQ), an $NDX proxy?
Shifting over to the StockCharts Market Summary page, you can see just how well $NDX is performing.
$NDX Breadth Metrics Reveal Bullish Participation
FIGURE 1. BREADTH AND BPI PANELS ON THE MARKET SUMMARY PAGE. While other indexes are growing increasingly bullish, you can see how the $NDX stands out.
Examining the Breadth panel on the left and zooming in on the moving averages, the $NDX has the most stocks trading above the 200-day simple moving average (SMA), a bullish signal considering that breadth of participation is critical when gauging the performance of an index. On the right panel, another breadth reading — the Bullish Percent Index (BPI) — tells you that 76% of the stocks in the index are triggering Point & Figure Buy Signals, giving you another angle on breadth, which happens to be in alignment.
Now that you’ve seen how $NDX is outperforming in terms of breadth, you’re probably curious about how many stocks are hitting new highs relative to the other indexes. Also, are there any particular standout subsectors or industries?
The New Highs panel can help answer both questions.
FIGURE 2. MARKET SUMMARY NEW HIGHS PANEL. The $NDX leads across the board, which asks the next question: Are there any standout sectors or industries represented within the index?
The $NDX has the highest percentage of stocks hitting new highs. If you click the Nasdaq 100 link, it will bring up a list of stocks in the index. The ones with a StockCharts Technical Rank (SCTR) score above 90 are listed below.
FIGURE 3. $NDX STOCKS WITH SCTR SCORES ABOVE 90. It’s a mixed bag in terms of industry.
The mix of subsectors and industries indicates there’s no one particular grouping (like all semiconductors or all AI stocks) leading the index. The $NDX’s outperformance is distributed across different areas.
So, back to the original question: is it worth entering or adding positions to QQQ?
Strategically, the outlook is murky. Geopolitical tensions and policy reversals can shift the market landscape overnight. But tactically, technical signals may offer potential entry points if you know where to look.
QQQ Weekly Chart: A Technical Rebound With Caveats
Let’s start with a broader view of QQQ, which is the likely investment vehicle for those who want to go long the $NDX. Here’s a weekly chart.
FIGURE 4. WEEKLY CHART OF QQQ. The ETF sharply recovered from a steep drop, but is there enough investor conviction to break above, or even test, its all-time high?
You can see how QQQ recovered sharply from its drop over the last quarter. While it’s trading above its 40-week SMA (equivalent to the 200-day SMA), you can also see how the 10-week SMA (or 50-day SMA equivalent) has fallen below it. Is it a false Death Cross signal, or is it indicating that the QQQ may not have enough momentum or investor conviction to test and break above its all-time high?
Zooming In: Key Support and Resistance Levels
To get a clearer picture, let’s zoom in on a daily chart.
This chart shows QQQ’s recovery in detail. There are several technical features converging to suggest critical support and resistance areas.
FIGURE 5. DAILY CHART OF QQQ. The key zones are highlighted. Now it’s a matter of seeing what QQQ does next.
Here’s a breakdown of the key things to watch:
- Note the long Volume-by-Price levels (on the left) and how they correspond to the green- and yellow-shaded areas, indicating a high concentration of trading activity which can serve (or has served) as support and resistance.
- The green range is where QQQ’s price is currently hovering, and the question is whether the ETF can break above it, opening up a path to test its all-time highs, or whether it will fall further.
- The space between the 200-day SMA and the yellow-shaded area marks a critical support range. QQQ has respected the 200-day SMA before, bouncing off it as price tested the level (blue arrows).
- The yellow-shaded area, another support range, marks a convergence of historical swing highs and lows (see blue arrows), serving as both resistance and support. It’s also another area of concentrated trading activity.
If QQQ falls below the green area, failing to advance higher, then you can expect support at the 200-day SMA (near $495) or the yellow-shaded range ($465 – $470). Below that, there’s another support range (shaded in red) near $430, but a decline to this level might also suggest weakness in investor conviction.
So far, the Relative Strength Index (RSI) is just below the 70-line, indicating room to run should there be enough momentum to advance it. However, the Chaikin Money Flow (CMF), though well above the zero line, shows that buying pressure may be dwindling a bit, enough to watch closely, since volume often precedes price direction.
At the Close
The Nasdaq 100 may be navigating a messy macro backdrop, but its breadth, momentum, and leadership show promise. Strategically, the terrain is uncertain. Tactically? The charts suggest a practical setup for those who are looking to lean into strength.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your personal and financial situation, or without consulting a financial professional.