One way to hedge further weakness from these “technology generals” is to purchase an ETF that shorts the Nasdaq-100, an investment newsletter said Monday. In other words, this bearish ETF is designed to profit when the tech-heavy index declines on any given day.
The past two sessions have seen “relative weakness” from the pair with Apple “firmly cracking” its 200-day exponential moving average and trading at its lowest level since November of last year, says Tarquin Coe, technical analyst at Investors Intelligence.
“Ongoing underperformance from prior leaders is not indicative of a healthy market,” he wrote in a note to subscribers Monday.
He recommended a position in ProShares Short QQQ (PSQ). The ETF seeks a return of 100% of the inverse, or opposite, performance of the Nasdaq-100 on a daily basis.
Coe pointed to the relative underperformance of the Nasdaq-100 vs. the S&P 500.
“Day by day, bearish technical evidence is mounting and as a result what initially appeared to be just a reversionary pull-back may now be morphing into something more severe,” the analyst wrote Monday.
The ratio of the Nasdaq-100-tracking PoweShares QQQ (QQQ) against the SPDR S&P 500 ETF (SPY) has “broken and sustained a move beneath its 200-day exponential moving average,” Coe added. “With the exception of a brief duck lower in March, the ratio had been above this average since the start of 2009 when it provided upside leadership out of the bear market lows. However, the reverse may now be underway and that is a concern.”
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