Nasdaq-100 ETF Slips with Apple

September 27th at 11:45am by Paul Weisbruch, Street One Financial

The Nasdaq-100 PowerShares QQQ (NasdaqGM: QQQ) has traded lower this week along with Apple (NasdaqGS: AAPL), the ETF’s largest holding at about 20% of the portfolio.

In yesterday’s segment we highlighted flagging performance in one of the best performing sectors in the U.S. equity market in 2012, Financials, and the potential uptick in activity that may occur in leveraged/inverse funds tied to the sector.

In similar fashion, another relative strength leader in 2012, Technology, has also staggered over the past few trading sessions as we draw near a close to the 3rd quarter (final trading day of the quarter is this coming Friday).

QQQ, which is widely watched as a market barometer in tandem with the NDX (Nasdaq 100 Index) which is the underlying index that QQQ tracks, has suffered outflows over the past few trading sessions, hemorrhaging more than $900 million and ranking number 2 overall in the ETF/ETN universe in terms of net redemption activity in the past week.

We have noted AAPL’s substantial weighting in the tech heavy QQQ and it is no secret that since the roll-out of the iPhone 5, the stock has been somewhat of a roller coaster ride. [Apple Drags Nasdaq-100 ETF on iPhone 5 Sales]

After trading north of $705 briefly just four trading sessions ago, AAPL has fallen sharply and suddenly, yesterday closing at $665.18 (50 day MA is currently $646.25 to put this in context).

Meanwhile, the NDX itself has been violating support levels in the past couple sessions closing yesterday at 2781.63 (our market technician David Chojnacki notes that support levels existed at 2800 and 2795, and there is also technical support below at 2775 which will likely be an important level).

Other top holdings in QQQ include MSFT (8.24% weighting), GOOG (5.48%), ORCL (5.00%), and INTC (4.30%).

Options flows have been relatively quiet in the tech space via QQQ or related ETFs such as XLK (SPDR Technology), but aside from the notable outflows that we have seen in QQQ itself, trading activity has been ramping up in leveraged/inverse funds that are tied to Technology laden indexes such as the NDX for instance.

Hedgers whom seem to be concerned about the erosion of gains accumulated thus far in 2012, as well as outright speculators may be involved in increased activity in funds including PSQ (ProShares Short QQQ), REW (ProShares UltraShort Technology), TECS (Direxion Daily Technology Bear 3X), SOXS (Direxion Daily Semiconductor Bear 3X), and SSG (ProShares UltraShort Semiconductors).

PowerShares QQQ

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

Full disclosure: Tom Lydon’s clients own AAPL and QQQ.

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