U.S. inventory markets appear to be reaching new all-time highs on a weekly foundation. The NASDAQ 100 index can greatest be traded and adopted utilizing essentially the most energetic exchange-traded-fund (ETF), the Invesco QQQ NASDAQ: QQQ. The pc and know-how sector firms dominate the QQQ. Whereas the markets are trending upward, a rising tide would not essentially carry all boats. Critics argue {that a} handful of firms dominate the market, impacting benchmark indexes disproportionately. Traders’ burning query stays: “The place does it go from right here?” Let’s look at the QQQ to discover potential strikes.

What’s the QQQ Index?

The QQQ tracks the motion of the Nasdaq-100 index, which is comprised of the 100 largest non-financial companies listed on the Nasdaq change. This modified weighted index relies on market capitalization (market cap). This implies the extra a inventory is valued primarily based on its market cap (calculated by worth x excellent shares), the extra it would affect the worth of the index.

The index could also be rebalanced quarterly or yearly when the weighting is just too concentrated. Technically, when the combination weight of its shares with weightings over 4.8% exceeds the 48% threshold, the Nasdaq might conduct a particular rebalancing prefer it did on July 24, 2023.

The Dominance of Prime 3 Holdings within the QQQ Index

Nonetheless, as of June 7, 2024, the highest three holdings, Together with Microsoft Co. NASDAQ: MSFT with 8.47%, NVIDIA Co. NASDAQ: NVDA with 8.12%, and Apple Inc. NASDAQ: AAPL with 8.08% allocation make up practically 25% of the overall index. This isn’t an remoted concern simply to the Nasdaq 100. In reality, the highest three holdings within the S&P 500 index are Microsoft at 7.06%, Apple at 5.71%, and NVIDIA with 4.66% allocation for a complete of practically 16% of the index.

How Nvidia Strikes the Markets

The bogus intelligence (AI) growth has surged Nvidia shares into the stratosphere, rising its market cap to just about $3 trillion. In reality, on most days, if NVDA inventory is surging, there is a good probability that the markets are rising. It isn’t simply the rising worth of NVDA inventory but in addition the domino impact of chief shares pulling up the laggard shares. It solely is smart that traders and merchants wish to soar into the “subsequent” inventory that may transfer in sympathy.

For instance, Nvidia’s rise tends to rally semiconductor and AI shares like Utilized Micro Units Inc. NASDAQ: AMD and Tremendous Micro Laptop Inc. NASDAQ: SMCI. Anticipation of the 10-for-1 inventory break up occurring on June 10, 2024, drove up shares, which impacted the rise within the QQQ to file highs.

QQQ Producing Stairstep Bull Flag Breakouts  

The weekly candlestick chart on the QQQ illustrates stairstep or back-to-back bull flag breakout patterns. To calculate helps, we utilized Fibonacci (fib) retracement and extension ranges primarily based on the sequentially increased market construction lows (MSLs), offering an upside goal primarily based on the seed wave breakout formation.

The fib plots have been made at $342.35 on the MSL and $449.39 available on the market construction excessive (MSH). This ends in upside targets primarily based on the fib extensions of 1.27, 1.414, and 1.618 potential reversal zones (PRZ). Upside targets are $478.22, $493.63, and $515.46. Every of those ranges has the potential for the value to reverse for a pullback and even reverse the uptrend.

The weekly relative power index (RSI) is coiling once more in direction of the overbought 70-band degree. Key fib pullback help ranges are at $437.14 (0.886 fib retracement), $408.47 (0.618/0.382 fib ratios), $383.22, and $342.35 swing low. 

Earlier than you think about Invesco QQQ, you may wish to hear this.

MarketBeat retains monitor of Wall Avenue’s top-rated and greatest performing analysis analysts and the shares they advocate to their shoppers every day. MarketBeat has recognized the 5 shares that prime analysts are quietly whispering to their shoppers to purchase now earlier than the broader market catches on… and Invesco QQQ wasn’t on the record.

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