Sometimes it pays to look beneath the surface.
The Nasdaq’s nearly 23% gain this year is higher than the S&P and Dow’s 19% and 15% rise, respectively, but unlike the other indexes, the Nasdaq hasn’t hit a record since April. This has prompted some investors to question whether the tech trade is rolling over.
But TradingAnalysis.com’s Todd Gordon says that just looking at the Nasdaq Composite doesn’t tell the whole story since the index is composed of a range of stocks including financial and retail companies. After looking at tech-specific ETFs, he argues that this is still very much a “tech-driven rally.”
On Tuesday’s “Trading Nation” he pointed to the divergence between the XLK — a tech-heavy ETF — and the QQQ, which tracks the Nasdaq 100 and includes a wider range of stocks, as evidence that investors should be picky when choosing vehicles to track the tech trade. The XLK is “way through the high,” says Gordon, while the QQQ is “weakening.” The XLK has gained 26% in the last six months, compared to the QQQ’s 18% rise.