What Happens When the Nasdaq 100 Lags?

Over the past month, the Nasdaq 100 ETF (QQQ) is down 3.7% while the S&P 500 (SPY) is up 0.01%.

Image of Nasdaq 100 ETF

Is this a good, a bad thing, or a “nothing burger” for markets?

Let’s take a look at the data to find out.

First, it’s important to note that such a wide divergence in performance is relatively rare. Out of 4,573 trading days since the inception of the Nasdaq 100 ETF, there were only 73 instances where QQQ was down more than 3% over the prior month while SPY was positive.

In those 73 instances, the forward S&P 500 returns have been below average in all time periods from 10 days through 12 months. The percentage of positive returns is also below average.

Nasdaq 100 and S&P 500 postive trend image

On average, it seems that Nasdaq 100 weakness in the face of a resilient S&P 500 tends to be a negative factor for the market ahead. When the Nasdaq 100 lags, the S&P 500 tends to follow that weakness, particularly over the subsequent month.

Will that be the case today? I don’t know. These are only averages; there have been many times where the Nasdaq 100 has been weak and nothing bad occurred.

But with the S&P 500 up 8 straight months and 15 out of the past 16 entering July, it is certainly something to consider.

Image of S&P 500 total return index

With the Nasdaq 100 leading to the downside and Technology representing the largest sector in the S&P 500 (at 22%), a larger drawdown (than the near-record low of 2.8%) in the coming months would not be surprising. It would be more surprising if such a drawdown did not occur.

Max intra year drawdowns of S&P 500 from 1928 to 2017


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This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.



Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts. He is the co-author of four award-winning research papers on market anomalies and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors and previously held positions as a Credit, Equity and Hedge Fund Analyst at billion dollar alternative investment firms.

Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.

You can follow Charlie on twitter here.

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