There was a change in portfolio construction in the QQQ.
They added SpaceX to the index and rebalanced around it. On its own, that move was small. But it made me pull up the new construction and look hard at the weights.
Most people still think of the QQQ as their broad, diversified tech bet. The Nasdaq 100, a little of everything.
When you look at what is inside it, that is not the fund you think you own.
Six of the 15 biggest names in the QQQ are semiconductors.
Think about that. Nvidia, Broadcom, Micron, AMD, and Intel have become a massive chunk of the index.
Apple is tangentially a chip story. Amazon and Alphabet build their own. Meta is making chips, and even Tesla might.
The fund you thought was diversified is a leveraged bet on one thing. Chips.
That alone is worth knowing. But it is not the part that made me stop and stare at the screen.
The part that got my attention is what these chips are doing relative to the rest of the market. And it is not normal.
Here is what I saw when I lined up the charts.
Apple and SMH, the semiconductor fund, have come apart. They are moving kind of opposite now, and on some days when one is up, the other is down. That is crazy.
For years these names moved together. Big tech was one trade.
Risk on, they all rose. Risk off, they all fell. That tight relationship has broken down.
Now you have Broadcom and Nvidia rallying the entire market on the days the chips are strong, and names like Apple sliding the other way. The index is being pulled in two directions by its own biggest members.
So what does that mean for you?
It means the QQQ has a split personality right now. Whether it goes up or down depends on which half wins, the chips or everybody else.
That is not a clean trend. That is a tug of war.
This is exactly why I have been sitting on my hands. I closed Exxon and Venture Global this morning and booked the gains. I looked hard at Disney and passed, because it rolled right back over, and I am glad I waited.
When the two halves of an index are fighting each other, you do not force a trade. You wait for a green candle and let the market show you which side is winning first.
The chips are running the show now. Until they stop fighting the rest of the tape, the smart move is patience.
We are going to sit tight until we get some resolution, especially on Iran, and let this thing tip its hand.
Your only option,
Mark Sebastian