QQQ Symptomatic of an Unhurried, Undecided Stock Market

Whether it is that “earnings season thing,” the ever-present “what will the Fed do/not do/hint at doing/should do” thing, or just the gradual erosion of what was once an “easy buy trade” in the minds of many investors, QQQ is full of Q-Q-Questions.

I think the best investors don’t force things. They don’t think of every dip as a buy, or every rally as a “sell into strength” moment. They just watch and listen to the market. And right now it is saying, “don’t rush me!”

Maybe we’ll get some clarity tomorrow with the jobs report. Hey, remember way back, what was it 2 years ago, when Nvidia’s stock price fell 10% in a single day? Wait, tomorrow will be 2 WEEKS since that happened. And it barely resonates on the chart now. The only thing certain about the behavior of not only QQQ but the non-sexy parts of the US stock market lately…is the uncertainty.

Technical Analysis: simplified

But enough of my talking. Here’s a chart that will hopefully show how “technical analysis” is really more than charts with 17 different indicators with weird names on them. And I’m focusing on QQQ because I am of the belief that it is the head of the market monster. As QQQ goes, so goes the broader market, at least for the foreseeable future.

Top part of chart: 1 year rolling returns of QQQ. That is, every 12-month period that ended at a month-end date. In the recent past, we’ve seen 40% gains in a 12-month time frame, a well as nearly 40% losses. The gains part has occurred quite a bit since the pandemic crash ended in March of 2020. But there is cyclicality to this, and it is one of those things to note while the market figures itself out.

Lower part of chart: same concept, but now it is 3-month periods. Far right side of chart, see how in just a few months the 3-month QQQ return went from 20% to 2%. And see also how that type of thing happens a lot. Welcome to modern markets, where, like the weather down here in South Florida, it changes fast.

Related: A Lesson in “Time Frame” Investing