Invesco QQQ Trust Faces Defining Moment as Tech Earnings Disappoint
Where the major fund goes from here might determine whether it can retest highs.
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As we dive into the heart of earnings season for tech companies, we could be off to a better start. Tesla TSLA and Alphabet GOOGL posted disappointing results overall. One could easily argue that Alphabet’s AI-related numbers were strong enough to overcome some general weakness and tough comparisons, and I would agree. On the other hand, Tesla looks overvalued and a bit lost.
My focus won’t be on those two, but rather on the Invesco QQQ Trust QQQ as it enters a pivotal trading period. QQQ broke its long, uptrend support level a week ago. The first few trading days saw a small bounce above last week’s lows, which provided some hope to bulls. Perhaps the recent decline was nothing more than a bullish flag — the pause that refreshes.
On Wednesday, traders encountered resistance at the 10-day and 21-day exponential moving averages (EMAs). The two EMAs are less than $1 apart, a fraction of 1% for a nearly $500 ETF. While the 10-day EMA still sits above the 21-day EMA, it threatens a bearish cross below it.
Next week could be a defining moment for the third quarter. While I don’t pay attention to the Full Stochastics indicator as a short-term trigger, I watch the longer-term trend. The bearish crossover, the black line crossing below the red, specifically above the 80 level, has created problems for bulls over the past three years.
Fortunately, that hasn’t always meant huge drawdowns. It has just as often resulted in sideways action until we see the Full Stochastics indicator dip to either 50 or 20 and then cross bullishly. If the QQQ can close above $485 and remain there for a few trading days, buyers should regain their confidence and retest highs. If bears take control, I’m looking for a test of $460 on the downside.
At the time of publication, Byrne had no positions in any securities mentioned.
