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Nasdaq Rebalancing Please click here for a chart of Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Note the following:
- From a long term perspective, the chart shows that QQQ is way over stretched to the upside compared to the 200 day moving average shown in yellow.
- The chart shows that QQQ has hit the low band of the resistance zone and has slightly pulled back after hitting the low band.
- The chart shows that QQQ is still above the trendline.
- The chart shows the slope of the trendline is now less than it was earlier when QQQ broke out of the support zone shown on the chart.
- From a short term perspective, RSI on the chart shows that QQQ has moved rapidly from a severe overbought condition to not overbought.
- Nasdaq 100 rebalancing will be effective as of Monday, July 24.
- Here are the weight changes of the magnificent seven stocks in Nasdaq 100 rebalancing:
- Apple Inc (NASDAQ: AAPL) will be reduced from 12.06% to 11.05%.
- Microsoft Corp (NASDAQ: MSFT) will be reduced from 12.74% to 9.80%.
- Alphabet Inc Class C (NASDAQ: GOOG) will be reduced from 7.61% to 5.70%.
- Amazon.com, Inc (NASDAQ: AMZN) will be reduced from 6.91% to 5.30%.
- NVIDIA Corp (NASDAQ: NVDA) will be reduced from 7.28% to 4.30%.
- Meta Platforms Inc (NASDAQ: META) will be reduced from 4.46% to 3.70%.
- Tesla Inc (NASDAQ: TSLA) will be reduced from 4.44% to 3.40%.
- Change in weight from the magnificent seven will be distributed to other stocks in the index. Here are the top beneficiaries:
- Broadcom Inc (NASDAQ: AVGO) goes up from 2.36% to 3.00%.
- PepsiCo, Inc (NASDAQ: PEP) goes up from 1.65% to 2.10%.
- Costco Wholesale Corporation (NASDAQ: COST) goes up from 1.58% to 2.00%.
- Adobe Inc (NASDAQ: ADBE) goes up from 1.49% to 1.90%.
- Cisco Systems Inc (NASDAQ: CSCO) goes up from 1.34% to 1.70%.
- Netflix Inc (NASDAQ: NFLX) goes up from 1.26% to 1.60%.
- In theory, on the surface it seems that there should be selling in the magnificent seven stocks, but there are counterpoints.
- As popular as Nasdaq 100 is, there is relatively little long term money tied to Nasdaq 100. Most long term money is tied to S&P 500. SPDR S&P 500 ETF Trust (ARCA: SPY) is the most popular S&P 500 ETF.
- QQQ is the second most liquid ETF, trading about $13B each day. However, money in QQQ tends to be short term.
- The Wall Street consensus is that investors should buy the magnificent seven stocks on any dip caused by rebalancing.
- Lately, investors have been front running events on the buy side.
- Investors are lined up to quickly buy even the slightest dip in the magnificent seven stocks.
- In addition to the special rebalancing, the waters are muddied by $2.4T of options expiration.
- Options expiration appears to be to the upside. There appears to be buying pressure in the magnificent seven stocks arising from options expiration. This counters the selling pressure in the magnificent seven from rebalancing.
- Prudent investors need to keep in mind that market mechanics have mostly taken over, and a majority of the rise in the stock market lately has been due to market mechanics. Investors can gain an edge by understanding market mechanics. There are several podcasts on market mechanics in Arora Ambassador Club.
- In the early trade, investors are buying TSLA and NFLX to take advantage of yesterday’s drop in these two stocks on earnings.
- American Express Company (NYSE: AXP) stock is being sold on earnings. AXP is a component of the Dow Jones Industrial Average.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents.
Momo Crowd And Smart Money In Stocks The momo crowd is buying stocks in the early trade. Smart money is inactive in the early trade.
Gold The momo crowd is selling gold in the early trade. Smart money is inactive in the early trade.
For longer-term, please see gold and silver ratings.
Oil The momo crowd is buying oil in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
Bitcoin Bitcoin (CRYPTO: BTC) is below $30,000.
Markets Our very, very short-term early stock market indicator is neutral. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Protection Band And What To Do Now It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider holding