Nasdaq 100 (QQQ) : How long will last this correction?

Invesco ETF Nasdaq 100 - QQQ - 08/10/2018

Short Term strategy: Positive (70%) / Trend -
Long Term strategy: Positive (95%) / Trend -

Characteristics of the ETF

The QQQ ETF (Powershares), which is quoted in USD on the Nasdaq, replicates the Nasdaq 100 index which is composed of the top 100 non-financial US stocks, mainly in the technology sector and listed on the Nasdaq, selected according to the importance of their market capitalization.

The ETF fees are 0.2% and the AUM is very high at $69bn. Replication is direct (physical) and there is a dividend distribution policy.

Alternative ETFs: ANX (Amundi in Euro), UST (Lyxor in Euro), CNDX (iShares in USD)

Latest developments

The Nasdaq100 rose by 31.5% in 2017, the highest annual increase since the 2009 rebound, and the rise has continued in 2018 (+ 15.7%) thanks to the GAFAs but with a more chaotic journey.

Facebook is experiencing a difficult year (-10.8% since the beginning of the year), which is linked to numerous scandals in relation to user data and a slowdown in the acquisition of new users on the Facebook platform, but offset by the strong Instagram development. But this underperformance is more than offset by Apple (+ 33%) and especially Amazon (+ 61%).

The valuation of Nasdaq100 remains reasonable at 21x earnings at 12 months, while growth should again be around 10% in 2019, despite fears about the consequences of the trade war with China and the semiconductor cycle, which gives signs of shortness of breath.



Index & components

The top 10 stocks in the index, including Apple, Amazon, Alphabet, Facebook and Microsoft, account for about 56% of the market capitalization of the index, while Apple alone accounts for 12,7% of the index.

The interest of this index lies in the fact of taking a diversified bet but concentrated on the most beautiful technological stocks, giving a good share to the "GAFA" (Google, Apple, Facebook and Amazon) which represent 37% of the capitalization.

The index is particularly influenced by Apple's prices, which fluctuate according to the success of its new smartphones. Note that large technology stocks have generally performed very well in 2017, especially GAFA but also semiconductors (Intel) and Microsoft. Large biotech stocks such as Gilead and Amgen have bounced back recently after a long period of wavering.

However, the attractiveness of US biotech companies remains significant at a national level, and these are prime targets for major US laboratories, as well as an alternative to transcontinental operations. The volatility of the index is not very marked, which reflects the considerable weight of market capitalizations often above $ 300 billion for the top 10 companies, see $ 500 billion for the top 5.

But the Nasdaq 100 is not just about its top 10 stocks, and the depth of the index makes it possible to invest in companies that are already established but still have a strong appreciation potential like Tesla, Xilinx or Symantec. The hegemonic position of the GAFA in the world begins to provoke reactions, especially in Europe, both on competitive positions or abuse of dominant positions could trigger heavy fines, as for Google (€4.3bn fine by the EC), but also on taxation while European countries seek to find an agreement to tax the revenues generated on their territory.

Chinese competitors are becoming more and more present, such as Alibaba or Tencent, and could soon threaten the supremacy of the leaders of American technology.

Weekly data

The weekly chart shows a very clear, unbroken uptrend since the end of the financial crisis in 2009. Since the beginning of the year, bearish attacks have taken place on the index with no consequences beyond a few weeks. A new attack started last week in the form of a bearish engulfment that could cause a further consolidation towards the level of 7200 pts.


Daily data

On the daily chart, the corrective move seems to have hit a classic first level near the EMA100 which could trigger a rebound that will have to extend above EMA13 and 26 to boost the uptrend in the near term. In case of failure, there will probably lead to a downward crossing of the short moving averages and a bearish breakout of the EMA100 which would open the target of 7020 pts which corresponds to the EMA200.


ETF Objective

QQQ is an ETF listed in USD, which seeks to replicate the Nasdaq100 index (103 US companies)


Inception date 10/03/1999
Expense ratio 0,2%
Benchmark Nasdaq 100
Issuer Invesco
Ticker QQQ
ISIN US73935A1043
Currency $
Exchange Nasdaq
Assets Under Management 69 117 M$
Replication Method Direct (Physical)
Dividend Distribution
Currency Risk No
Number of Holdings 103
Risk 3/5

Country Breakdown

USA 100%

Sector Breakdown

Information Technology 44%
Telecom Services 22%
Consumer discretionary 17%
Health Care 10%
Consumer Staples 6%
Industrials 2%

Top Ten Holdings

Apple 13%
Amazon 11%
Microsoft 10%
Alphabet 9%
Facebook 4%
Intel 3%
Cisco 3%
Comcast 2%