Here’s why the QQQ ETF, which tracks the Nasdaq 100 Index, is rising

The Invesco QQQ ETF, which tracks the Nasdaq 100 Index, has entered a bull market after soaring by almost 30% from its lowest level in April. It has jumped to $515, its highest level since March, and a few points below its all-time high of $514. This article explores why the QQQ ETF has rebounded and why some of the top companies are leading the charge.

Why the QQQ ETF has surged

The QQQ ETF has surged in the past few weeks for three main reasons. First, there are signs that the trade war is easing after Donald Trump reached an agreement with the United Kingdom and China. The Chinese offer is to cut tariffs from 145% to 30%, with a provision of removing the 20% Fentanyl levy if China stops the flow of precursor materials. 

Second, the QQQ fund has jumped because of how American stocks react to major black swan events. Historically, the first response mechanism is usually to sell assets when there is a major event as happened during the pandemic and the Global Financial Crisis (GFC). 

After that, US stocks always rebound as investors wait for intervention from the Federal Reserve. For example, the QQQ ETF crashed from $228, its highest level in March 2020, to $159.8 after the US declared the COVID-19 emergency. It then made a V-shaped recovery as the Fed cut interest rates and started a quantitative easing program,

This, the QQQ ETF jumped because of the strong earnings season. FactSet data shows that 90% of all companies in the S&P 500 Index have published their earnings. The blended earnings growth in that period was 13.4%, the second consecutive quarter of a double-digit growth rate.

These results, however, were seen as being transitory as they did not include the Liberation Day tariffs that Trump implemented last month. 

Top Nasdaq 100 Index gainers 

Many companies have driven the QQQ ETF growth. Palantir Technologies' stock price has jumped by almost 70% this year, making it the best performer in the fund. This growth happened as demand for its AI solutions by companies rose in the first quarter. 

Read more: Palantir stock: why Paul Meeks sees potential despite ‘egregious’ overvaluation

MercadoLibre stock has jumped by 46% this year as the e-commerce giant’s growth accelerated. Most of these gains happened recently when it published strong earnings, helped by its financial solutions nd growth in Argentina. It made a profit of $494 million during the quarter. 

Strategy, formerly known as MicroStrategy, stock has soared by 40% this year asthe Bitcoin price has continued rising. Bitcoin has moved to $104,000, and is within a touching distance to its all-time high. 

The other top-performing companies in the QQQ ETF were Zscale, Constellation Energy, Netflix, CrowdStrike, PDD Holdings, and Take-Two Interactive. 

QQQ ETF analysis

QQQ fund chart | Source: TradingVew

The daily chart shows that the QQQ ETF has rebounded after bottoming at $402 in April this year. It has jumped to over $500 as it formed a V-shaped recovery. Along the way, the ETF moved above the 50-day and 200-day moving averages while the Average Directional Index (ADX) has tilted upwards.

Therefore, the fund will likely continue doing well, with the next level to watch being at $540, the highest swing in February, and 4.75% above the current level. It will need to rally above that level to invalidate the double-top chart pattern, whose neckline is at $402.

A move above $540 will point to more gains, potentially to the next psychological level at $600. The alternative scenario is where the ETF plunges and initially retests the 200-day moving average at $480.