Inflation...again?
Our weekly ETF charting education focus
The Nasdaq 100 (QQQ) ETF is showing signs of rolling over. It has been going on since about a month ago, though few recognized it. It is hard to see on this chart, so don’t strain your eyes too much. But what I see is a very gradual slowing of the pace of the rally, akin to driving, slowing down, coming to a virtual stop, then turning the car around. That’s a non-technical way of saying that the rate of ascent of the red line (20-day moving average) is hinting that it is tiring out. That’s why the bottom section of the chart (PPO indicator) is gradually fading lower. That type of “divergence” is a warning sign, but until there was news to accompany it, it is easy to just ignore. YOLO, right?
Let’s see if today’s news, which impacted the bond market, small caps, NVDA and TSLA more than the broad stock market, has more life to it. If so, as I’ve drawn in below, there’s a clean 10% drop from today’s close to $395 for QQQ on the table. This is what I focus on as a risk manager: not predicting what will happen, but looking for clues about what could happen, but that few are focusing on.
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