Nasdaq Warning Signs: QQQ Relative Weakness Builds Beneath the Surface

 

Above is a daily chart of QQQ, with a ratio chart of QQQ versus SPY in the lower pane, and together they are beginning to tell a subtle but important story. On the surface, QQQ appears relatively calm. Price has been consolidating, moving sideways and giving the impression of stability. However, when you look beneath the surface through the lens of relative strength, a different picture starts to emerge.

The QQQ/SPY ratio line has been showing early signs of weakness during this consolidation. About two weeks ago, the ratio broke its uptrend line and, notably, it has not been able to reclaim that level since. That failure matters. Relative strength trends often turn before price does, and prolonged inability to regain a broken uptrend can be an early warning that leadership is eroding. This makes the current consolidation in QQQ less comforting than it might initially appear.

What adds to this concern is the broader market context. While QQQ is chopping sideways and its relative strength is fading, IWM is pushing to new all-time highs. Small caps making fresh highs while the Nasdaq lags is a classic sign of rotation and potential weakness in former leaders. This divergence doesn’t guarantee immediate downside, but it does suggest that capital is flowing away from large-cap growth and into other areas of the market.

Looking at the internals of the Nasdaq reinforces this view. Many of the index’s most influential names are no longer acting like leaders. Stocks such as NVDA, AMZN, NFLX, AMD, MSFT, and META are not making new highs. In fact, several are beginning to roll over or break minor support levels. When heavyweight components start to lag together, it often precedes broader index-level weakness.

That said, spotting relative weakness does not automatically mean it’s time to short. Relative weakness is a condition, not a trigger. I prefer to let price confirm the thesis. That means waiting for clear support to break or for a pivot low to be taken out before getting involved. Right now, QQQ has not provided that confirmation, so there is no actionable entry.

A good example of this approach was NFLX. The stock showed relative weakness first, but I only acted once support was decisively broken. Until the market proves the case again, the game plan is simple: stay patient, remain objective, and continue to monitor price action closely. For now, I’m sitting tight and alert to the growing signs of weakness in the Nasdaq, but waiting for the market to make the next move.

You can read about my NFLX post from 10 days ago here:  NFLX: Relative Weakness You can't Ignore