As we enter the last day of the month, the Invesco QQQ Trust (QQQ) has left orbit. I don't buy into the end-of-the-month tape painting as much on a monthly basis compared to quarterly close-ups and end-of-the-year, so I'm not looking for too much influence from the calendar here.
The QQQ has now extended well above its 10-day exponential moving average (EMA) by more than $10, or roughly 3.5%. We've witnessed this a few times in the first week of February and early April. Those are the cleanest and fastest breakaways from the 10-day EMA, although there have been periods of similar separations.
After a strong open, driven by AI, semiconductors and the apes in the spaces, technology did cool a bit by the close, although still higher for the day. I believe we are now in the position where either the QQQ pulls back into the area between the 10-day EMA and 21-day EMA or it trades flat and the EMAs catch up to the current price.
Thus far, the QQQ has lacked the escape velocity to extend away from the 10-day EMA more than we currently sit. That's not to say I'm bearish on tech, but instead focused on a pattern that has repeated all year long. It reinforces the idea of trailing stops rather than guessing where to sell.
If you're on the sidelines, I would follow this approach to enter. Wait until the QQQ breaks below the 10-day EMA. I prefer to buy or add on a bounce off the 21-day EMA, but there's currently a decent size gap between the two.
While focused on the QQQ, one needs to keep an eye on AI-related names, especially AI semiconductor names. If they lose momentum it may be tough for the market to hold this altitude as the reallocation of those dollars may not flow to names with an influence as high on the indexes given the market-weighted nature of the Nasdaq and the S&P 500.
And that other eye? Sell-the-news still feels like a huge risk. Keep it peeled for announcements revolving around the debt ceiling.
