Art's Charts

Quantifying the QQQ Effect on SPY

 | 

We all know that many stocks in the Nasdaq 100 ETF (QQQ) are also part of the S&P 500 SPDR (SPY). In addition, it is clear that these QQQ stocks affect the performance of SPY. But how much exactly? Today we will answer that question and compare performance for these two ETFs.

The chart below shows two year performance for SPY and QQQ in the top window and the QQQ:SPY ratio in the middle window. QQQ and SPY were neck-in-neck in October 2019, but QQQ broke away soon thereafter and seriously outperformed SPY the last six months. We can see the QQQ:SPY ratio turning up sharply in December and hitting new highs in May.

The bottom window shows the correlation coefficient holding above .70 since October 2018. In fact, this indicator has not dipped below .50 since September 2018. This is hardly surprising considering the influence of QQQ stocks on SPY.

QQQ is leading the market and very close to a 52-week high. This is a major positive for SPY because of their component overlap. I went through their component lists and found the following:  

  • 82 of the 100 stocks in QQQ are also in SPY
  • The total weight of these 82 stocks is some 40% of SPY
  • These stocks include the tech titans: MSFT, AAPL, AMZN and GOOGL
  • These four account for 41.34% of QQQ and 19% of SPY

Note that these weightings change over time. For example, in March 2019 these four stocks accounted for 37.2% of QQQ and 13.76% of SPY. Their influence has grown along with their market cap and they are more influential than ever.

TrendInvestorPro.com follows QQQ, SPY and 58 other ETFs as part of a core ETF List on a regular basis. Subscribe today and receive our Master ETF ChartList and the Essential Breadth Indicator ChartList as bonuses. You will also get immediate access to the: weekly ETF report, ETF ranking tables, market timing models, weekend video and more.

Click here to take your analysis to the next level!

--------------------

Choose a Strategy, Develop a Plan and Follow a Process

Arthur Hill, CMT

Chief Technical Strategist, TrendInvestorPro.com

Author, Define the Trend and Trade the Trend


Want to stay up to date with Arthur's latest market insights?

– Follow @ArthurHill on Twitter

– Subscribe to Art's Charts

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
Subscribe to Art's Charts to be notified whenever a new post is added to this blog!
comments powered by Disqus