The ProShares UltraPro QQQ ETF (QQQ) stock has done well this year. It has risen by 42% this year and by 100.2% in the last 12 months. The Nasdaq 100 index has risen by 19% this year and by 35% in the last 12 months.
Technology stocks are doing well
The ProShares UltraPro QQQ ETF has been one of the best-performing companies since its inception. It has risen by over 2,200% in the last decade and over 16,470% since its inception. $1,000 invested in the fund on its first day would now be worth over $101,000.
Its performance has been because of the strength of the technology industry, where companies like Microsoft, Apple, Nvidia, Alphabet, Amazon, and Meta Platforms have become trillion-dollar giants. Combined, these companies are valued at over $15 trillion or 53% of the US GDP.
Other companies like Broadcom, Tesla, Oracle, and ASML have become giants because of the rising demand for technology.
Analysts believe that tech companies, while highly overvalued, have more room to grow because of emerging technologies like artificial intelligence (AI), machine learning, and Internet of Things.
Federal Reserve interest rates
The first important catalyst for the TQQQ ETF is the Federal Reserve, which has started cutting interest rates. In its October meeting, it slashed rates by 0.50% and hinted that more cuts were coming.
Odds of more aggressive Fed cuts have fallen after last week’s nonfarm payroll (NFP) data. According to the Bureau of Labor Statistics (BLS), the economy added over 250k jobs, higher than analysts expected. The unemployment rate retreated while wage growth bounced back.
Therefore, analysts expect smaller cuts, say 0.25%, lower than the previously expected 0.50%. While this is bearish for tech stocks, analysts expect that the overall trajectory of cuts will be positive for these companies.
The key catalysts for the TQQQ ETF this week will be the upcoming US consumer inflation data and the FOMC minutes. These events will provide more information about the Fed’s next action.
Corporate earnings season
The most important catalyst for the TQQQ fund will be the upcoming earnings season, which will start on Friday when companies like JPMorgan, Wells Fargo, Blackrock, Bank of New York Mellon, and Fastenal publish their earnings.
Technology companies like Taiwan Semiconductor, Netflix, and ASML will then release their financial results next week. Taiwan Semi and ASML are important because they are often seen as indicators of the broader tech sector.
Other large tech companies like Microsoft, Google, Tesla, Meta Platforms, and Amazon will then publish their earnings the following week.
Taiwan Semiconductor’s revenue can be a good indicator of Nvidia and AMD’s performance since it is the biggest fabrication company globally.
FactSet estimates that S&P 500 companies will report annualised earnings growth of 4.2%. While this growth rate will be lower than the second quarter, they will mark the fifth straight quarter of positive earnings growth.
The technology sector is expected to report the highest annualised growth rate, helped by Nvidia, whose revenue is expected to come in at $32 billion. With Nvidia included, the tech sector will grow by 15.2%. Without it, analysts expect that its growth will be 7.9%.
US election ahead
The other big catalyst for the TQQQ ETF will be the upcoming US election in November. While the fund may have some volatility ahead of the election, history suggests that stocks often rise afterward.
This recovery happens as investors embrace a new normal about the upcoming administration. Besides, data shows that equities do well regardless of who is in the White House. Also, the fund will likely do well as the new president starts forming their administration.
Polls show that Donald Trump and Kamala Harris have equal chances of winning the election, meaning the winner could surprise the market, leading to some volatility. As you recall, stocks plunged sharply after Trump won the 2016 election and then bounced back.
Read more: Kamala Harris vs. Donald Trump: how the jobs report, inflation could shape US presidential elections
TQQQ ETF has a bullish technical
TQQQ chart by TradingView
TQQQ has a technical bullish catalyst as well. The fund formed a golden cross pattern in September last year and has rebounded sharply since then.
It has also formed a cup and handle chart pattern, one of the market’s most popular bullish signs. The recent retreat was part of the handle section.
The MACD indicator has remained above the neutral point, while the Relative Strength Index (RSI) remains above the neutral line of 50.
Therefore, the fund will likely continue rising in the near term. Most of the upside will be confirmed if it moves above the key resistance point at $84.75, the upper side of the cup pattern. If this happens, the next point to watch will be at $100.
The bullish view will become invalid if the ETF drops below the lower side of the handle section at $50.
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