QQQ Heads Toward Favorable Seasonal Spot

The PowerShares QQQ (NasdaqGS: QQQ), commonly known as the Nasdaq 100 tracking ETF, is already up 32% this year, but the fifth-largest U.S. ETF by assets could be poised to offer more near-term upside if favorable seasonal trends kick in.

Plenty of ETFs, including sector funds tracking cyclical groups, international funds and small-cap plays, enter periods of seasonal strength in December. QQQ is no exception. [Germany ETF: A Compelling Seasonal Play]

QQQ’s “average return per period during the past 28 ‘sweet spot’ periods was 4.8 per cent. The trade was profitable 85 per cent of the time and outperformed the S&P 500 index 79 per cent of the time,” report Don and Jon Vialoux for the Globe and Mail.

The pair cite data courtesy of EquityClock.com and note that the true seasonal sweet spot for QQQ is Dec. 20 through Jan. 19.

The reasons for QQQ’s strong seasonality at this time of year extend beyond the mere potential for a Santa Claus rally. QQQ has a 57.3% weight to the technology sector and some of that chunk is allocated to semiconductor stocks. That sub-industry is also in the midst of favorable seasonality. [‘Tis the Season for Semis]

In addition, the Nasdaq, and as a result QQQ, has evolved over the years. That means a higher weight to consumer discretionary stocks, another group that historically performs well in the fourth quarter and into the first quarter of the new year. QQQ’s weight to the discretionary sector is over 20% and includes high-flying names such as Amazon (NasdaqGM: AMZN), Priceline (NasdaqGM: PCLN) and Elon Musk’s Tesla (NasdaqGM: TSLA). [Nasdaq’s Evolution Encourages New Highs]