Nasdaq 100 (QQQ) : Not out of the wood yet…

Invesco ETF Nasdaq 100 - QQQ - 19/11/2018

Short Term strategy: Negative (40%) / Trend +
Long Term strategy: Positive (80%) / 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 $66bn. 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 rebound in 2009, and the increase continues in 2018 (+ 7.3% since the beginning of the year) despite the correction in progress especially concerning GAFAs like Amazon, which is now down 23% from its highs of September and continues to fall rapidly, as Google is 17% below its peak and Facebook is at 36% below but seems to be stabilizing. Apple, which had held up well until then, began to turn down after mixed Q3 results and a less favorable outlook.

US technology companies suffer from market risk-off mood, as investors now prefer companies with less exposure to the international cycle or interest rates, with high yields and low exposure to China.

US tech stocks are worried about a worsening of the US-China trade war, while companies like Apple and the semiconductor industry are particularly exposed from both the supply chain and end markets.



Index & components

The top 10 stocks in the index, including Apple, Amazon, Alphabet, Facebook and Microsoft, account for about 57% of the market capitalization of the index, while Apple alone accounts for 11,9% 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 31% 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 the imminent crossing of EMAs13 and 26 which, if confirmed, would be a significant negative signal. Prices must therefore return above 7150 pts to avoid it, and in a very short time. The risk in this type of confirmation is a too weak return towards the moving averages which triggers a new bearish departure. In this case, the EMA100 would be a priority target to 6400 pts.


Daily data

On the daily chart, we can see an attempt to rebound from the 6600 pts but the index will have to overcome many obstacles before the reversal being confirmed. The EMAs13 and 26 are descending and the EMAs100 and 200 have become major resistances that will be difficult to exceed  in the current context. A failure of this rebound seems the most likely outcome. A recovery above the EMA100 would be confirmation of the recovery of the short-term trend.

ETF Objective

QQQ is an ETF listed in USD, which seeks to replicate the Nasdaq-100 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 66 370 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 43%
Communication services 22%
Consumer discretionary 16%
Health Care 9%
Consumer staples 6%
Industrials 2%

Top Ten Holdings

Apple 12%
Microsoft 11%
Amazon 10%
Alphabet 9%
Facebook 4%
Intel 3%
Cisco 3%
Comcast 2%
PepsiCo 2%