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QQQ: Have We Seen The Highs?

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Dividend Investors


  • Forceful rallies in QQQ seem to have reached a point of exhaustion.
  • Further downside extensions in QQQ would create a topping formation that is unlikely to reverse in thin summer trading conditions.
  • Price levels at 136.20 present a critical inflection point that looks as though it will see an imminent break.

In a recent article covering the PowerShares NASDAQ Trust (NASDAQ: NASDAQ:QQQ), we recommended that investors remove exposure based largely on the fact that the earnings outlook for tech stocks is not as optimistic as most analysts had previously suggested. To this, we can add the fact that bull rallies in QQQ were far more massive than anything seen in the SPDR S&P 500 ETF (NYSEARCA: SPY) or SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA) during the same period. This disconnect between market price activity and the underlying fundamentals should have been enough to signal major red flags for investors, and we are already trading 4% lower in roughly one week of holiday-interrupted trading. This leaves us with the central question of whether or not we have seen the yearly highs in QQQ, and there are significant reasons to believe that this might actually be the case. Here, we will look at some of the reasons QQQ is likely to underperform its major counterparts in the second half of this year -- and this should be viewed as another recommendation for investors to take a more protective stance in the ETF.

From a comparative perspective, this three-month chart in QQQ should make it clear that the ETF is not exactly a perfect match for investors that are looking to avoid volatility. Over the last few months, we have seen some significant differences in the earnings performances for the companies that make up the ETF. For the most part, the better-known blue chip names have held up their end of the bargain while smaller companies have languished and this has made it very difficult for the market to come up with a stable trend direction in QQQ. This on its own might be enough to deter some investor types from initiating new

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Finding deep value through high-yielding dividend investments.  In our analysis, we use fundamental valuation techniques that are combined with technical charting methods.  We establish both bullish and bearish stances on key assets in the market.  We look for undervalued stocks and missed opportunities as a means to identify inefficiencies in the system.  And then we capitalize on them.

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