bucketshopper
Short

QQQ vs. IWM

QQQ-IWM  
QQQ-IWM  
Simple comp between QQQ and IWM . Spread between the two reaching its highest level today with tech rallying and small caps underperforming. One theme that has been developing over the past month or so is whenever the Nasdaq makes a new record high, other indices fail to see the same follow through while virus headlines continue to worsen.

Comments

Reaching highest level doesn't mean you go long. Good time for value investing as small/med caps will outperform big caps after virus calms down.
+2 Reply
@Aivabtc, I agree. This is just a comp between the flat price of the ETFs and ignores any value weightings. However, as working capital balances have been eroded and the massive levels of debt sitting on balance sheets, I dont know if there is a lot of "value" for small/medium caps. The companies at this end of the market are usually the ones that see the most volatility in revenues. With revenues falling, debt servicing has a larger effect on cash flows. I think small-caps will actually underperform on a risk-adjusted basis over the next 12 months.
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Everyone is missing the most important consideration and that is the bond market.
These tech companies have continued to see eye-popping P/E multiple expansion in the face os steadily declining top and bottom line revenues. The evaluations are not only extreme, they are obscene as they are based on outright fraud, which frankly, is exactly what massive share buy-backs are. Why do you think the corrupt FED is now buying corporate bonds, and now the third largest holder of LQD?
Doesn't matter. Watch what happens to tech when their hundreds of billions worth of bonds implode....
+1 Reply
Nasdaq has been consistently outperforming the market, both pre-COVID and in the current environment. It is a hard trend to bet against. Anyway, here is what we have
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This is reaching Tech bubble of 2000 levels. Do people not understand that if Main Street fails, tech doesn't get customers?
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bucketshopper aaronsmth5
@aaronsmth5, The sentiment of this market does feel a lot like the early 2000s - overlooking fundamentals and rotating to risk allocations regardless of headlines. One thing to note is there is an overlap between Main St. and "tech." That category is pretty broad across the consumer and business customer groups. I dont think tech will necessarily lose customers - sure, consumers might curtail some spending but that's not really "tech." While I do think that tech is in a bubble, relative to everything else, it's trading like a safe-haven right now. The big " * " with this market vs. what was seen in early 2000s is seemingly limitless monetary support that is forcing investors to take risk in search of a return.
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aaronsmth5 bucketshopper
@bucketshopper, that's a very good point and you are right that tech became the new safe haven. I'm curious how earnings will play out the next few weeks. I work in healthcare IT and we have drastically decreased spending and tightened the budget across the board, and I would expect others to follow suite.
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It seems very simple.
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we really appreciate your analysis for our strong confidence.....
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bucketshopper DawnButlers
@DawnButlers, sorry, but what?
+1 Reply
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