QQQ ETF stock: Train is about to leave the station but there’s a catch

The Invesco QQQ ETF (QQQ) stock continued its spectacular rally on Wednesday as investors cheered the encouraging macro events from the United States. The fund, which tracks the tech-heavy Nasdaq 100 index, jumped to a high of $387. It has soared by over 13% from the lowest point in October.

The Nasdaq 100 index has jumped sharply in the past few days as investors cheered several important events. First, economic data published two weeks ago revealed that the labour market softened in October. The economy added 150k jobs during the month while the unemployment rate rose to 3.9%. 

Additional data published on Tuesday showed that the country’s Consumer Price Index (CPI) dropped to 3.2% in October. Core inflation, which excludes the volatile food and energy products, dropped to 4.0%. 

Meanwhile, the Producer Price Index (PPI) also dropped in October. The headline figure fell to 1.3% while the core PPI dropped to 2.4%. These numbers mean that the American economy is slowing.

As a result, the implication is that the Federal Reserve will be careful when making its next interest rates. Most analysts expect that it will pause its hikes in its December meeting. In a recent statement, analysts at UBS predicted a series of rate cuts in 2024.

All this explains why the VIX, US dollar index (DXY), and bond yields have pulled back recently. The 10-year Treasury yield has dropped to 4.5% while the 30-year fell to 4.64%.

Most importantly, there are signs that the Federal Reserve has succeeded in engineering a soft landing. Inflation is coming down while the economy has avoided the much-feared recession. Also, there are signs that the US has avoided a government shutdown once again after Congress voted for a laddered bill.

Therefore, there are conditions for technology stocks to continue rising in the coming months. Besides, corporate earnings from companies like Microsoft, Meta Platforms, and Nvidia have been quite strong.

Still, the biggest risk for American equities is the state of America’s fiscal situation as US debt has jumped. Total interest payments are approaching $1 trillion.

QQQ chart by TradingView

Turning to the daily chart, we see that Invesco QQQ ETF has been in a strong bullish trend in the past few days. This rally has seen it reach the important resistance point at $387.50, an important level since it was the highest point in July. 

This is an important level since the stock has formed a double-top pattern, which tends to be a bearish sign. The neckline of this pattern is at $343.61. Therefore, a break above this resistance will validate the bullish trend. It will also open the possibility of it moving to the crucial resistance at $400. 

The risk is if the ETF validates the double-top pattern. Such a move could see it retreat and retest the neckline at $343.

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