I am not a currency guy. I'm not even that wise when it comes to worldly macroeconomics, so please don't take my word for anything. With that being said, it looks that QQQ is currently strongly inversely correlated to DXY, the U.S. Dollar index. Historically this has always been the case, more or less, but I wanted to bring it to other's attention.
Do you believe the Fed is going to raise rates? If the Fed raises rates, it'll strengthen the dollar. As is plainly evident... that's bad for QQQ.
If worldwide investors get spooked by the Russia/Ukraine instability and suddenly flee to US Treasuries as a safehaven, what will happen? Will yields go up? Yes. Will that make the U.S. Dollar stronger? It should. Again, this is bad for QQQ, and likely SPY and DIA and IWM.
Which is the chicken and which is the egg in this scenario I leave up to people smarter than I to figure out, but the correlation is there nonetheless. US Dollar going up is very bad for the US markets, and the Fed is indirectly going to accomplish just that; boost the US Dollar as it tries to reign in inflation.
Where's this leave QQQ? In the gutter.
Do you believe the Fed is going to raise rates? If the Fed raises rates, it'll strengthen the dollar. As is plainly evident... that's bad for QQQ.
If worldwide investors get spooked by the Russia/Ukraine instability and suddenly flee to US Treasuries as a safehaven, what will happen? Will yields go up? Yes. Will that make the U.S. Dollar stronger? It should. Again, this is bad for QQQ, and likely SPY and DIA and IWM.
Which is the chicken and which is the egg in this scenario I leave up to people smarter than I to figure out, but the correlation is there nonetheless. US Dollar going up is very bad for the US markets, and the Fed is indirectly going to accomplish just that; boost the US Dollar as it tries to reign in inflation.
Where's this leave QQQ? In the gutter.
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This has stood true 3 months later. If the US Dollar index (DXY) keeps going up, QQQ will likely continue to go down. They are inversely locked at the moment.