The Invesco QQQ rallied on Thursday after the Senate reached a deal to keep the government funded. The index also rallied as investors waited for the latest non-farm payrolls (NFP) and the upcoming earnings season. The fund rose to $365, which was about 4% above the lowest level this week.
QQQ volatility continues
Invesco QQQ is one of the biggest ETFs in the world with more than $183 billion in assets under management (AUM). The index tracks the Nasdaq 100 index, which is made up of the biggest technology stocks in the United States like Microsoft, Apple, and Tesla.
The QQQ fund has been relatively volatile in the past few weeks after it rose to an all-time high of $383. This week, it declined by more than 8% from its all-time high as investors continued worrying about the American debt ceiling.
The main issue was that Senate Republicans and Democrats were divided on how to move forward. Democrats were insisting on getting support from Republicans to increase the debt ceiling. On their part, Republicans were insisting that Democrats should pass it on their own.
On Wednesday, signs of optimism happened after the Senate minority leader hinted that the short-term bill to prevent the country from running out of money. The measure, which was passed on Thursday, will see the country be funded by December this year. During this time, Democrats will likely have more time to pass the bill through reconciliation, which is often a long process.
The debt ceiling issue had an impact on Invesco QQQ and other American ETFs because of the impact of a default. Many analysts believe that a major sell-off would happen in stocks if the United States defaulted on its obligations.
Earnings season set to begin
The next key catalyst for the Invesco QQQ will be the upcoming earnings season that will start in the coming week. While many technology companies will not publish their earnings this week, investors will react to those that will release.
Blackrock, the biggest asset manager in the world, will publish its earnings on Wednesday next week. On the same day, JP Morgan, the biggest American bank, will publish its quarterly results.
Other top companies that will deliver their earnings next week are Delta Airlines, Johnson & Johnson, Netflix, State Street, Goldman Sachs, and Procter & Gamble, among others.
In general, analysts expect that these companies will publish relatively strong results. The firms benefited from the overall reopening of the economy.
Meanwhile, in the immediate short term, the QQQ will react to hints of monetary policy. The US will publish its jobs numbers on Friday. The data is expected to show that the labour market held steady in September.
Therefore, with inflation set to remain high, there is a likelihood that the Fed will start tightening earlier than expected. A hawkish Fed tends to be bearish for the QQQ fund.
The daily chart shows that the QQQ price dropped to a low of $350 this week. This was a notable level since it was along the ascending trendline that connects the lowest levels since March this year. The fund is attempting to move above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has dropped from the oversold levels.
Therefore, with the debt ceiling issue handled, for now, there is a likelihood that the fund will keep rising in the near term.