QQQ Vs IWM: Which One Is Telling The Truth?

The stock market had a big day Monday recouping most of its losses from Friday. The S&P was +1.32% and the NASDAQ +1.88%.

However, a look beneath the hood shows the same problem I’ve been harping on for at least a month now: bad breadth. The Russell 2000 of smaller stocks was actually -0.18%. NYSE + NASDAQ Advancers to Decliners was 3,851 / 4,203. That’s right: more stocks declined than advanced Monday.

In fact, the market is even narrower than that. The market is really being propped up by seven stocks: AAPL MSFT AMZN GOOG/GOOGL TSLA FB NVDA.

How can a market of over 8,000 stocks be propped up by 7 stocks? Because those seven stocks have a combined market cap of ~$12 trillion. A tenth of a percent move in AAPL is ~$2.5 billion – more than the value of many stocks in the S&P. Therefore, strength in these seven stocks can mask a lot of weakness beneath the surface – and that is exactly what is happening.

QQQ vs IWM: Which one is telling the truth?

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