Can The Tech Supremacy Reigns? 👑
The pandemic turbocharged the tech sector, but the latest rally is more about the impact of AI and the potential that its development will drive a new paradigm for profits. The Nasdaq 100 outperformed the S&P 500 last month by the most in more than 20 years, with the tech-heavy index soaring 7.6% to put the broader gauge’s 0.3% rise deep in the shade.
The Invesco QQQ Trust Series 1 (NASDAQ:QQQ), the biggest ETF tracking the Nasdaq 100 index, witnessed $1.8 billion in net inflows in May, the best monthly performance so far in 2023.
Tech rally continues
Investors seem to be betting that companies such as Nvidia Corp. and C3.ai Inc. are going to be proof against the recession so many are predicting for the US, as a result of the Federal Reserve’s savage tightening cycle.
Certainly, the sector’s gains are standing in stark contrast to a number of indicators signaling that some sort of slowdown is coming, or has even arrived. After tracking the ISM Services PMI closely since the pandemic, the Nasdaq 100 has broken higher despite the activity gauge’s sustained declines.
Bears are hibernating
The technology and communication services sectors account for around 37% of the total S&P 500 index. Within this niche, the combined weight of five tech titans accounts for around 25% of the index: Apple Inc (NASDAQ:AAPL) at 7.9%, Microsoft Corp. (NASDAQ:MSFT) at 7%, Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) at 3.9%, Amazon.com, Inc. (NASDAQ:AMZN) at 3.1%, and NVIDIA Corporation (NASDAQ:NVDA) at 2.7%.
An equally weighted portfolio made up of these five S&P 500 heavyweights would have gained 62% so far in 2023, compared to the 9.7% performance of the market.
As these stocks gathered speed and rose in relative weight, investors seized the opportunity to profit from a potential AI boom.
Trade on breakouts only
Today on this QQQ chart, trading is over 60 on the RSI and the VIX is once again close to making new 52-week lows. While these indicators don't tell the whole tale, they are an effective gauge at determining when the market moves up or down too quickly over time. In order to protect one's capital, raising stops here only makes sense.
Friday's economic data is all about May jobs. Any overnight news of the US Senate making progress toward a debt limit bill being signed will also affect markets. A strong jobs report has been frequently discussed as potentially harmful to the FED's mission to bring inflation down to 2%. If people have jobs, then they have money, and they can do little about companies keeping prices high, especially when it comes to the costs of living.
Goldman Sachs’ Note on Key Jobs Report:
* We estimate nonfarm payrolls rise by 175k in May, below consensus of +195k and the +222k average pace of the last three months. Job growth tends to slow in May when the labor market is tight. We believe this tendency reflects the diminished availability of workers in late spring. The more reliable Big Data indicators also indicate a slowdown in May job growth.
*We estimate the unemployment rate was unchanged at 3.4% (vs. consensus 3.5%), reflecting a modest rise in household employment and unchanged labor force participation (at 62.6%).
* We estimate a 0.25% increase in average hourly earnings that lowers the YoY rate to 4.32% (vs. consensus of +0.3% and +4.4%).
⚠️ Trading Tips: Looking at calls above 353.36 and puts below 351.06 (stronger support at 350). Given the catalysts on Friday, there should be significant volatility and it would be wise to raise those stops to manage one's risk 🙏
Please click Like 👍, Comment 💬 & Repost 🔄 this article found at the bottom of your screen. Follow me for the latest news, trading ideas & strategies to ride the market daily with profits! 🤑
@CaptainTiger @MillionaireTiger @TigerStars @Daily_Discussion
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Anyone that does technical analysis on QQQ, is it possible for QQQ retrace back to 320s lvl before a move up to 370s? A brief explanation would be helpful! Thank you
If history repeats itself this is one long deadcat bounce for a massive leg down and we are very close to the top.
Looks like this is the drop the bears warned us about. For those that were able to weather the storm and still have the stomach for it, now is the time to buy the dip.
"Up Up & Away" after the FED ! QQQ $375 SPY $450 ! Then comes "The Darkness" !
QQQ is going to go up forever ! Never another "red" day ! We will all be filthy rich !
Remember be fearful when others are greedy. The stocks can also go down a lot
Personally, I believe this is a dead cat bounce for the next mega crash.
As we all know, the top QQQ companies are earnings behemoths and imo don’t see that changing.
The Nasdaq composite index (IXIC) follows all stocks listed on nasdaq. Something like ~4000 (don't quote me on that number). QQQ follows the 100 largest non financial stocks.
Iwm up again on volume, going to 200, then the market plateaus. August will be time to go back to 60:40.
Can anyone explain why the QQQ was 0.38% off of the Nasdaq today?