Nasdaq 100 (QQQ) : A “Facebook effect”?

PowerShares ETF Nasdaq 100 - QQQ - 30/07/2018

Short Term strategy: Positive (90%) / Trend -
Long Term strategy: Positive (100%) / 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 grew by 31.5% in 2017, the highest annual increase since the 2009 rebound, and the increase has continued in 2018 (+ 14%) since the beginning of the year thanks to GAFAs but with a more chaotic course.

Profit-taking was strong on the index this week after Facebook's results (down 20% in two days), whose user growth was below expectations, as well as Intel, whose activity level  of the data centers was disappointing. These results were offset by the good performance of Amazon and Google.

So there is not really "Facebook" effect on the index, and the market consolidation remains measured.


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 11.1% 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 perfectly bullish medium term trend, but the index seems to have reached a short-term peak, and is starting a process of return to the mean whose first natural target is to reach the EMA13 located at 7140 pts. The oscillators remain positive with no sign of reversal.


Daily data

On the daily chart, we can see the short-term correction on the index which fell directly to the EMA26 level at the end of the week. This correction could deepen a little towards the 7150 pts level but its potential seems limited. The major resistance is formed by the EMA100 which is around 7000 pts which would become a target in case of deepening of the correction.


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 PowerShares
Ticker QQQ
ISIN US73935A1043
Currency $
Exchange Nasdaq
Assets Under Management 67 732 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 60%
Consumer discretionary 22%
Health Care 9%
Consumer staples 6%
Industrials 2%
Telecom services 1%

Top Ten Holdings

Apple 11%
Alphabet 10%
Microsoft 10%
Amazon 10%
Facebook 5%
Intel 3%
Cisco 2%
PepsiCo 2%
Comcast 2%