Above is a daily chart of QQQ with its 50-day exponential moving average, and in the lower pane I’m looking at a ratio line of QQQ versus SPY, also with a 50-day EMA applied to that ratio. This combination gives me a much clearer picture of what’s really going on beneath the surface. On the price chart alone, QQQ looks fine. It’s clearly trading above its 50-day EMA, which by itself would suggest the trend is still intact. However, when I shift my focus to the ratio line, a different story starts to emerge.
The QQQ/SPY ratio is not above its 50-day EMA. That’s a clear sign of relative weakness. In plain terms, even though QQQ is holding up on an absolute basis, it’s underperforming the S&P 500. This tells me that money is rotating elsewhere and that Nasdaq stocks are not leading the market right now. As a relative strength trader, this is information I take very seriously because leadership matters. Markets tend to follow the strongest areas, and right now the Nasdaq is not wearing that crown.
That said, the appearance of relative weakness does not automatically mean I need to short the market. This is an important distinction. Relative weakness is a warning, not a trigger. At this point, I view it as a yellow light. It’s telling me to be cautious, tighten risk, and pay closer attention to key levels. As long as price continues to hold support, buyers are still in control enough to keep things stable.
What would change my stance is a clear break of support. If QQQ breaks below this week’s low of 614.56, that would be a strong signal that sellers are starting to overwhelm buyers. At that point, the combination of relative weakness and a loss of price support would suggest that lower prices are likely in the days ahead.
So for now, I’m not aggressively bearish, but I am on alert. Relative weakness has shown up, and I respect it. If price confirms it by breaking support, I’ll adjust quickly and expect downside follow through.
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