Thanks to some relatively disappointing earnings results from companies in the Tech sector (Alphabet-GOOGL and Seagate-STX) and positive results from Caterpillar (CAT) and McDonald’s (MCD), the Dow spiked higher at the open while the Nasdaq 100 opened lower. As a result of the divergence, the spread between the opening gap of DIA and QQQ was the sixth widest reading of the current bull market. The only other days where we saw a wider divergence are shown in the table below. Interestingly enough, one of those occurrences was exactly five years ago today! More importantly, though, all but one (8/24/15) of these occurrences came at the heart of various earnings seasons and suggests that moves like this are generally a short term phenomenon resulting from the flood of earnings reports rather than a sign of a longer term type of rotation.
Looking at the performance of both ETFs from the open to close on the five prior days shown below, there really hasn’t been much of a discernible trend where QQQ makes up for lost ground or DIA continues to run. In three of the five days, QQQ outperformed DIA from the open to close, while on the other two days DIA outperformed.
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