Invesco QQQ Trust ETF Stock Price and Forecast: Why is the Nasdaq down 2%?

Nasdaq futures and ETF QQQ fall 2% in premarket trading on Tuesday.
European markets are also well lower with Dax -1.5% and Eurostoxx -1.3%.
Are yields to blame as German 10-year goes flat and US 10-year rises to near 2%.

Ivan Brian FXStreet

Market nervousness returns on Tuesday after a holiday-induced hiatus on Monday. Equity investors have become yield junkies, nervously watching every uptick, and the situation on Tuesday will not comfort them. The German 10-year bund has put in the most impressive of moves and is nearly at 0% for the first time since summer 2019. US yields, while closed on Monday, are now awakening and also tracking higher. The yield on the 10-year is 1.83% and rising.

The NASDAQ is the most rate-sensitive of the three main US stock market indices due to the number of high-growth stocks in the index. To recap, high growth means future profits are discounted to present value using the prevailing interest rate. The higher the interest rate, then the higher the discount back to present value for the purposes of valuing cash flows and the stock in question.

NASDAQ (QQQ) Stock News

The yield on the US 10-year is now at its highest point in two years and will give cause for serious contemplation to money managers and the balance of their portfolios. The move could be accelerated by the amount of margin trading among traders who aggressively bought the NASDAQ dip last week. The triple leveraged Pro Shares Ultra QQQ ETF (TQQQ) was the biggest gainer last week in the Refinitiv Lipper Alpha fund flow survey, with inflows of $2.2 billion. So if the Nasdaq (QQQ) is down 2%, then this TQQQ version will see investors suffer a 6% loss. This will likely lead to further panic selling.

NASDAQ (QQQ) Stock Forecast

FXStreet has been pointing to this potential for a while. The Nasdaq (QQQ) put in a bearish double top, and combined with that strong signal we also had a bearish divergence from the Relative Strength Index (RSI). Combining two already powerful signals was enough to set alarm bells ringing, and now that is playing out. The immediate target of a double top here is $352 that is close to the last major low from October so will make for an interesting reevaluation if and when we get there. There is not much volume there. With a volume profile gap until $342, that is the extended support.

The 200-day moving average is at $365, and this is key for the medium-term view. Successfully defending will put in a higher low than the last major low at $352. For now, the risk-reward is for more losses.

Invesco QQQ Trust Nasdaq ETF chart, daily

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Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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