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And the S&P 500 gets lost in the shuffle
QQQ, thanks to Nvidia’s earnings, is flying high today. So with “the market” doing so well, all 30 Dow stocks should be up, right? How about this: as I write this mid-day on Thursday, all 30 are down. What the #*(@?
This is how modern markets try to fool us. In the same way that we’ve seen the divide between rich and poor go parabolic, the same is true for the stock market. The “in crowd” is QQQ, the Nasdaq 100 Index ETF, and the “old-fashioned out of touch” crowd, perception-wise, is the market measure I grew up with, the Dow, which is now portrayed in ETF form via DIA.
Something I’ve written about before here, on Seeking Alpha and on etf.com, is the increasingly volatile relationship between QQQ and DIA. And my research that shows that a mix of 67% (2/3) in DIA and the other 1/3 (33%) in QQQ essentially tracks SPY, and has for years. That’s the type of simple but elegant relationship from which my ROAR Score concept was born. And I’m going to start applying it in more places for our premium subscribers.
This DIA/QQQ situation is far from the only ETF “pairing” that I think can be a simple but elegant tool for investors, particularly those in the early stages of trying to figure all of this out.
Current chart picture: QQQ and DIA
QQQ looks OK, just broke out, and while the lower indicator (PPO) is starting to look “tired,” the trend is in place for now. Of course, with QQQ, that can change harshly, quickly. Not often, but when it does, the “pile on” effect to the downside can be every bit as swift as it has been to the upside since mid-April.
And DIA? This chart bears no resemblance to the one above, which means something will give soon. Remember that market peaks often occur when QQQ runs amok to the upside for a matter of weeks or months, the rest of the market looks “stupid” and people are afraid to say they own anything but tech stocks. Then, a rush for the exits in those high-flying QQQ stocks.
I have no idea how it will play out. I am just watching it closely, to see if anything actionable occurs, in QQQ, DIA and the relationship between them. Remember, these are highly cyclical, so I believe it is best not to overreach when the net-net is a market not really trending strongly in either direction.
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