Mega-Cap Growth stocks have led the stock market weakness on the way down in 2022. They have also lagged during the 4th quarter rally. This weakness has been a drag on major stock indexes such as the S&P 500 and the NASDAQ Composite. With the recent rally phase well underway could the Mega-Cap Growth stocks be preparing to play catchup with a bout of outperformance? The Mega-Cap Stocks have immense capitalization weighting in the major stock indexes. If they shake off their underperforming ways, even temporarily, it could put stock indexes into hyperdrive. We turn to a Swing Trading PnF case study of the QQQ ETF to determine if a ‘Cause’ has formed for a rally and the upward potential of that advance.
Chart Notes:
- A potential Swing Trading Accumulation Structure back to September for QQQ.
- QQQ Mega-Cap stocks have been a performance drag on major stock indexes during 2022.
- Relative Strength downtrend for the current quarter and the year illustrates the weakness.
- Relative Strength downtrend since August is attempting to reverse upward.
- QQQ is now in a Backup position with low volatility and diminished volume.
- The Overhead Supply trendline is immediately above and is important resistance.
Point & Figure Chart Notes:
- Swing PnF count (yellow shading) has price objectives near the August highs.
- A rise to this level would exceed the overhead Supply Line and the 200 d.m.a.
Better participation from these all-important mega-cap stocks would be a boost to the stock indexes, at least temporarily. A Swing PnF accumulation count appears nearly complete. This is a very important juncture on the charts, and we should monitor developments closely.
All the Best,
Bruce
@rdwyckoff
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