Performance Difference Between QQQ and QQEW

Advances in price are strongest when they are broad, and the current stock market picture is not one depicting broad strength.  Apple, Amazon, Nvidia, and the other big techs are doing well, but the rest of the stock market has not been doing so well. Through July 11, QQQ is up 20.1% during 2024, but the equal-weighted QQEW is only up 6.6%.  QQQ and QQEW are both ETFs that are tied to the stocks in the Nasdaq 100 Index, but the difference is in the weightings of those stocks.  QQQ does well, or does poorly, based more on the performance of its largest components. 

Calculating those performance numbers got me curious about what it might mean to have such a large spread, so I put together the indicator in this week's chart.  It looks at the 6-month percentage change in both QQQ and QQEW, and then calculates the difference between those.  Positive readings mean that QQQ was doing better over the prior 6 months, while readings below zero mean that QQEW was doing better.

Really high positive readings like what we have just seen are really rare, and usually associated with important price tops.  A couple of exceptions are worthy of note.  A high reading in late 2011 did not mean much.  That was after QE2’s ending in June 2011 brought a quick drop for the overall stock market, although QQQ held up well.  And the big spike high reading in 2020 reflected the effects of all the Covid money hitting the banking system.  That money kept on coming into the banking system into 2021, and the party kept on going then.

Other than those exceptions, big high readings like what we are seeing now are a problem for the bullish case.  And we do not have the Fed doing QE now to bail out the bulls.