QQQ ETF stock: Santa Claus rally to happen if this happens

The recent Invesco QQQ ETF (QQQ) rally has stalled close to its highest level in 2023. The fund, which tracks the tech-heavy Nasdaq 100 index, was trading at $387.30 on Wednesday, a few points below the YTD high of $394. In all, the fund has jumped by over 13% from its November lows.

Santa Claus rally ahead?

Santa Claus came early for American stocks as they staged a strong rally in November. Most equities, especially those in the technology space, surged hard. The rally intensified after the US published relatively weak non-farm payrolls (NFP) and consumer inflation data.

These numbers revealed that the economy added 150k jobs in October while the unemployment rate rose to 3.9%, signaling that the labor market was cooling. In another report, the Bureau of Labor Statistics (BLS) revealed that the headline Consumer Price Index (CPI) dropped to 3.2% in October.

Further, the price of crude oil dropped in November, leading many investors to predict that inflation would continue falling. According to AAA, the average gas price in the US has plunged ro $3.21, down from $3.41 in the same period last month.

Therefore, there is an increasing possibility that the Federal Reserve will start cutting interest rates in 2024. Bill Ackman has predicted that the first rate cut will happen in March next year. He is supported by the Fed Rate Monitor tool, which has a 51% probability of cut in March.

Invesco QQQ also jumped as the fear and greed index moved to the greed zone of 70 while the VIX index fell to $12. The latter index has crashed by more than 50% from the highest level this year, signaling that investors are embracing a risk-on sentiment.

The QQQ ETF has more upside in the coming weeks as the Santa Claus rally takes shape. This rally will be impacted by the upcoming jobs and inflation numbers. If inflation moves below 3% as economists expect, it will likely raise the possibility of a rate cut by the Fed un the first half of the year.

QQQ ETF stock analysis

QQQ chart by TradingView

Turning to the 4H chart, we see that the Invesco QQQ ETF has been in a strong uptrend in the past few weeks. This rally has stalled recently after the fund moved above the key resistance at $387, its highest swing in July. This price was the previous YTD high. In most cases, assets tend to consolidate after hitting a key resistance point.

QQQ has formed a double-top pattern, which is usually a bearish sign. This is a big risk for the ETF. Therefore, bulls need to move solidly above the November high of $394 to validate the Santa Claus rally. If this happens, the next key resistance point to watch will be at $400.