Want to know where the Nasdaq 100 is going? Watch the SOX

• Posted by Greg Harmon
• on March 24th, 2015

The Nasdaq 100 includes the 100 largest non-financial companies listed on the Nasdaq Stock Market. From etf.com the latest information on sector breakdown is 56.7% technology, 20.5% consumer cyclicals, 13.6% healthcare, 4.4% consumer non-cyclical and 3.6% industrials with a few other small pieces. Tech heavy for sure, but a good amount of diversification. This makes for a very interesting quandary. You see, 56.7% is a large allocation to technology. But that leaves 43.3% that is not technology related. But this 43.3% of non-tech stocks seems to have had no impact over the last 8 months.

The chart above shows the ETF for the Nasdaq 100 ($QQQ) with the Philadelphia Semi-Conductor Index (SOX) as the area chart behind it. Quite a tight fit huh? No need to guess at how close the Nasdaq is following the SOX. The lower panel shows the correlation coefficient. It has been between 70 and 100% nearly the entire period. The lowest point only 60%. And look how often the correlation has been above 90%. This is a crazy tight correlation given the explosiveness of the healthcare sector. Want to know where the QQQ is going? Watch the SOX.

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