The Nasdaq Composite keeps pushing toward record highs. That scenario is obviously benefiting the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100, but Nasdaq ebullience could be tested this month.
After soaring in May, QQQ is now up more than 19% year-to-date. The Nasdaq Composite’s May gain is particularly relevant because that extends the index’s winning streak to seven consecutive months. That is rare, but an eight-month winning streak for the Nasdaq is almost unheard of. The last time Nasdaq Composite had a seven-month winning streak was 2013 and prior to that, it was 2009, according to Schaeffer’s Investment Research.
Since the November U.S. presidential election, technology is the best-performing sector.
However, with technology’s ascent and that of QQQ, come concerns that the Nasdaq-100 is too heavily exposed to a small number of stocks. Additionally, some analysts opine that the benchmark’s significant technology overweight leaves it vulnerable should tech stocks fall out of favor.
QQQ is heavily allocated to big-name tech and Internet stocks, such as Apple Inc. (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: MSFT), Amazon.com Inc. (NASDAQ: AMZN) and Facebook Inc.
“Since 1978, there have been nine seven-month winning streaks for the Nasdaq — what we’ll call a “signal” — the longest ending in February 1983, at 11 months. A year after the last seven-month rally, which ended in May 2013, the Nasdaq was up another 22.76%, according to data from Schaeffer’s Senior Quantitative Analyst Rocky White. In fact, the Nasdaq has been lower at the one-year benchmark just one time — after the aforementioned 1983 signal — but hasn’t moved higher for eight straight months since 1995, with the last three winning streaks capped at seven,” notes Schaeffer’s.
QQQ, one of the largest U.S. ETFs, has equal-weight equivalents equal-weight equivalents such as the Direxion NASDAQ-100 Equal Weighted Index Shares (NYSEArca: QQQE) and the First Trust NASDAQ-100 Equal Weighted Index Fund (NasdaqGS: QQEW).