Nasdaq 100 (QQQ) : is the correction already coming to an end ?

PowerShares ETF Nasdaq 100 - QQQ - 10/07/2017

Short term strategy  : Negative (20%) / Trend -
Long term strategy : Positive (95%) / Trend -

Characteristics of the ETF

The tracker QQQ (Powershares) tracks the Nasdaq100 Index, which is composed of the 100 largest non-financial US securities, primarily in the technology sector and listed on the Nasdaq, selected according to the importance of their market capitalisation. The top 10 holdings, including Apple, Amazon, Alphabet, Microsoft Facebook, and represents approximately 50 percent of the market capitalisation of the index, while Apple alone weighs more than 10%. The interest of this index is to take a diversified bet but still focused on the best technology stocks, especially GAFAs (Google, Apple, Facebook and Amazon). The Index is particularly impacted by the Apple stock price that have been under pressure well into 2016, in the wake of disappointments on the iPhone 6s and Smartwatch, but the stock has picked up since the summer 2016, with the successful launch of the iPhone 7.

Big technology stocks posted generally very good performance since the beginning of the year 2017, in particular the GAFA but also Semiconductors (Intel) and Microsoft. Large stocks of biotechnology, like Gilead remained under pressure for many months, reflecting uncertainty about US policy in terms of health gouvernment policies, and the reduction in the speculative premiums after the failure of major transatlantic operations. However, the attraction of biotechnology companies US remains on a national level, as these corporations are often targets of choice for major US labs, as well as an alternative to transcontinental operations.The volatility of the Index is rather limited, which reflects the significant weight of market capitalisations often above 100 bn $for the top 10 companies, even 300 bn $ for the first 5.

The costs of the ETF is 0.2%, which is in the lower range of our selection. The liquidity of this ETF is 50 208 M$.

The earnings growth should be above 10% in 2017, but the valuations looks now stretched (> 20x profits) while the stock’s prices of GAFA fly to new highs and are the real engine of the market. The Nasdaq 100 posted a 16% rise since the start of the year, and and the short-term correction started in June (around -5% from the highest) seems insufficient for an immediate recovery. The quality of T217 will be key to avert a deepening of the correction.

Monthly data

The monthly chart shows that the strong bullish trend suffered a halt in June, with a bearish candle which is currently not really followed up by a deepening of the correction in July. The expected Q217 results should, however, largely determine the form of the correction. The oscillators are in the upper zone but do not show for the moment an imminent reversal sign.

The index is thus weakened in the short term, but a continuation of the correction is not necessarily acquired.


Weekly data

The weekly chart shows the weakening that has occurred on the index for 5 weeks. Each week of correction, succeeded a limited rebound, but this gives the overall movement relatively little velocity. The weekly candlestick that has just ended is not really bearish, and one wonders if this movement is not coming to an end to give way to a more lateral than corrective phase.

The MACD has crossed down, but remains in the upper zone which leaves a chance to this scenario.



ETF Objective

QQQ is an ETF based on the Nasdaq-100 Index.

The Fund will, under most circumstances, consist of all of stocks in the Index.



Inception date 10/03/1999
Expenses 0,2%
Benchmark Nasdaq 100
Issuer PowerShares
Ticker QQQ
CUSIP 73935A104
Currency $
Exchange NYSE Arca
Assets Under Management 50 208 M$
Method of rreplication Direct (Physical)
Dividend Distribution
Currency Risk No
Number of Holdings 107
Risk 3/5


Country Breakdown

USA 97%
China 2%
United Kingdom 1%

Sector Breakdown

Information Technology 58%
Consumer Discretionary 22%
Health Care 11%
Consumer Staples 5%
Industrials 2%
Telecom Services 1%

Top Ten Holdings

Apple 12%
Alphabet 9%
Microsoft 8%
Amazon 7%
Facebook 6%
Comcast 3%
Intel 2%
Cisco 2%
Amgen 2%