QQQs 10 year outperformance coming to an end? Here’s how to trade it.

Did you know the QQQs (NDX Index) have outperformed the SPY (SPX Index) by roughly 100% over the last 10 years?  The recent weakness in technology earnings (GOOGL, AAPL, and MSFT) results have contributed to the QQQ beginning to trail the SPY in performance.  Looking at the chart below, the ratio spread between the QQQ and SPY appears to be forming a head and shoulders pattern over the last year.  If the ratio breaks the neckline (dotted line) of the head and shoulders pattern a new trend may be emerging.

The Tribeca Trade Group Pair Trade:

-          Go long SPY and short the QQQ

Using options:

-          Buy the SPY Jan 210/215 call spread and buy the QQQ Jan 102/107 put spread


QQQ vs SPY ratio 5 year chart


        source: Bloomberg



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