For Immediate Release
Chicago, IL – September 7, 2023 – Today, Zacks Investment Ideas feature highlights S&P 500 Index ETF SPY and Nasdaq 100 ETF QQQ.
September Surprise? 3 Reasons Why Wall Street Might Unexpectedly Prevail
Over the past twenty years, the S&P 500 Index ETF and the Nasdaq 100 ETF have averaged losses in September. However, investors are best served to look beyond a twenty-year average. On Wall Street, context is crucial in successfully determining the market’s direction. In the past twenty years, few markets have exhibited the type of power the 2023 market has. Understanding the context in which a market is operating in is essential for making informed investment decisions. Below are three reasons the robust start to 2023 means September into year-end will turn out to be bullish for stocks:
Power Off the Bottom Tends to Persist
The 200-day moving average is the most widely used moving average to size up the general market trend. Though most investors simply gauge whether a stock or market is above or below the moving average, a unique and powerful way of studying the moving average is to monitor the price’s distance away. According to hedge fund consultant Seth Golden, the Nasdaq has been 20% below the 200-day moving average and risen 20% above the moving average only four times since 1985 (1991, 2003, 2009, 2023?). Fascinatingly, each time, the month of August marked a consolidation point, which ultimately marked the low for each year.
Intermediate Trend: 21-Week MA the Best Guide
The best way to learn about a subject is to simply observe it. In other words, if you’re tasked with learning about fish, you should first sit next to a fish tank and observe how they act. Wall Street’s version of the “fish tank” is the price and volume chart. Looking atf the Nasdaq 100 Index ETF with an overlayed 21-week moving average, one can observe that the area is a critical level to watch from an intermediate-term trend-following perspective.
For example, after the COVID-19-induced crash of 2020, once QQQ regained the moving average, it never looked back. In the next few months, the QQQ would nearly double and successfully retest the level five times. Conversely, once the QQQ broke the 21-week MA in early 2022, it dropped from ~$380 to ~$245 and bumped its head on the 21-week twice. Finally, in January 2023, a decisive close above the 21-week set off the animal spirits, and the tech and growth-heavy Nasdaq 100 never looked back. In the latest development, the QQQ got close to the 21-week MA in mid-August before being bought up with a vengeance.
Strength Begets Strength
On Wall Street, trends tend to persist much longer than most expect. What seems too high often goes higher. For 2023, historical data backs up this sentiment. When the S&P 500 Index from January through July is greater than 10%, and August is red, the remainder of the year is up 100% of the time historically for an average gain of 9.9%. In other words, if history repeats itself, equities have a lot more meat on the bone into year-end.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Invesco QQQ (QQQ): ETF Research Reports
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