The market overlooked its post-FOMC meeting blues as it rose to new highs.
Small stocks reversed with a vengeance.
The breakout in QQQ we had expected occurred as projected.
Key Question:
Does this week’s reversal mean more new highs going into the summer? We examine the QQQ chart.
Performance Snapshot
The reversal in small-cap stocks (VTWO) summed up the week: from last (-4.26%) to first (4.51%), with QQQ making the trip in the other direction. The mega-cap technology stock-driven S&P-500 and QQQ indexes made new highs, but the Dow Industrials and the even broader NYSE composite fell a bit short. Strong earnings, good economic data, and soothing testimony from FOMC Chair Powell helped the market ignore inflation data.
Our sensitive Bull-Bear balance from leveraged and inverse ETFs captured market action perfectly. Last Friday, it had turned negative, but it rallied all week and ended above 60, which usually implies that the trend will continue for a bit longer. Now note that last Friday’s reading was just a bit below -31, so it was not to be taken as seriously as it should be if it were below -60.
We had observed a few weeks ago that the growth-value balance had tilted toward growth. That observation was validated this week when we look at the Vanguard cap-weighted ETFs. The mega-cap and large-cap growth ETFs (VOOG, MGK) are dominant, and value ETFs (VOOV, MGV, IVOV, VIOV) are definitely lagging. This partly explains why the indexes such as the S&P-500 and QQQ made new highs this week.
QQQ Breaks Out on Schedule
A few weeks ago, I had speculated that the QQQ price pattern was shaping up to make new highs in the time period bracketed by the blue rectangle, from mid-June to mid-July. Last week QQQ nudged up to new highs, and this week it rose to the first target around 352 (the high on Thursday was 351.46). This is encouraging, and it implies we could work our way toward higher prices. Standard technical analysis also says that a re-test of the breakout price level is routine. Hence, a brief decline toward the breakout point at 345 is unlikely to change the underlying uptrend.
We summarize the twenty stocks in the QQQ index that had the strongest returns this week as a potential list for you to explore for the next few weeks. The names should be familiar, for some of them were stars of the bounce from the March 2020 lows, such as Peloton (PTON), Splunk (SPLK), and Moderna (MRNA). I have paired their weekly performance with month-to-date performance also for context.
For a more detailed look at these stocks, you can use our stock finder table.
Wrap-up
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Thank you for spending some time with me.
Disclaimer
And now for some housekeeping. This publication is for “edutainment,” education, information, and entertainment purposes only. It is not to be construed as investment advice. Past performance is not necessarily indicative of future results. Our disclaimer at chandeindicators.com is included herein by reference.