In Twitter parlance, the Nasdaq Composite has been in “beast mode” since the March 2009 market bottom. Since March 9, 2009, the PowerShares QQQ (NasdaqGM: QQQ), the fourth-largest U.S. ETF, is up 253.3% compared to a 203.2% gain for the S&P 500.
The past month has been starkly different for the Nasdaq as growth and momentum plays, including Internet and social media stocks and ETFs have been repudiated in favor of more docile fare such as industrials and utilities sector funds. Since March 10, the Nasdaq Composite is off 5.1%. QQQ is lower by 5.2% since reaching a multi-year peak on March 5. [Internet ETFs Remind of Old Lessons]
An important technical situation is brewing on the Nasdaq Composite that traders should be looking at.
“Tech stocks have corrected significantly over the past month. As a result the tech-laden Nasdaq is currently down over 5% from its March 5th peak. For some perspective, today’s chart illustrates the overall trend of the stock market (as measured by the Nasdaq Composite) since 2000. As today’s chart illustrates, the post-financial crisis rally (which began in early 2009) has been significant enough to have the Nasdaq surpass its credit bubble highs of late 2007. As today’s chart illustrates, however, the Nasdaq has just broken below support of its 17-month uptrend channel,” says Chart of the Day.
Identifying the sources of the Nasdaq’s and QQQ’s recent weakness is not difficult. What was once an advantage, that being an increased weight to consumer discretionary and health care stocks relative to how the Nasdaq look just before the bursting of the tech bubble, has turned into a burden. [The Changing Face of the Nasdaq]
Shares of Amazon (NasdaqGS: AMZN), classified as a discretionary stock, are down more than 12% in just the past month, and are off more than 18% this year. The iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB) entered Wednesday with a one-month loss of more than 13%. Gilead Sciences, IBB’s third-largest holding, is QQQ’s tenth-largest holding.
The saving grace, if it can be called that, for the Nasdaq has been old school tech. While Internet and social media stocks have wilted, the stocks that were important contributors to the Nasdaq’s late 1990s glory have been stalwarts. [Old Tech Boosts These ETFs]
Over the past month, shares of Microsoft (NasdaqGS: MSFT), Intel (NasdaqGS: INTC), Cisco Systems (NasdaqGS: CSCO) and Qualcomm (NasdaqGS: QCOM) are up an average of 5.6%. Those stocks combine for nearly 18% of QQQ’s weight.
Nasdaq Composite
Chart Courtesy: Chart of the Day
ETF Trends editorial team contributed to this post. Tom Lydons’s clients own shares of Amazon, Microsoft, Cisco and QQQ.