There are some red flags that can be waved for the QQQ
In the first trading week of 2022, Schaeffer’s founder and CEO Bernie Schaeffer found the refusal of the CBOE Market Volatility Index (VIX) and its associated exchange-traded notes (ETN’s) to throw anything resembling a tantrum over the negative start to 2022 (overlaid with Fed talk) to be of some interest. In turn, he constructed a table of key levels for SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust Series 1 (QQQ) on their weekly charts below, as well as gather several data points and markers of key levels to watch.
What become most notable for the SPY was that the equity’s Jan. 4 all-time high fell shy of a key level off the October 2020 bottom. SPY then closed on Jan. 7 below a key level off the October 2021 low. That same level runs in-line with the 50-day moving average, as seen in the chart below.
Meanwhile, looking at the QQQ you will find that the peak of $408.71 was captured on Nov. 22, and since then there have been just five closes above $400 for the security. Now, the tech-heavy trust is down 5% year-to-date amid the tech sector selloff, while the SPY boasts a less-severe 2% deficit so far for 2022. On Friday, Jan. 7, QQQ closed below the $380 level, which is around 5 points shy of a key October 2021 bottom, as well as the 80-day trendline. Also worth noting, the Jan. 7 close at the time marked only the second settlement below the 80-day moving average since Oct. 13.
While in neither case is there what Bernie Schaeffer would call a "technical breakdown operative" at this point, there are some red flags that can be waved. This is especially in the case of the QQQ, as an additional 3.3% decline would produce a full 10% correction off peak levels.
Subscribers to Chart of the Week received this commentary on Sunday, January 16.