Nasdaq 100 Vs. S&P

Weekly chart of the Nasdaq 100 {QQQ chart courtesy of FINVIZ.com}.  "Nazzie" is up about 3% in the past year versus about a 15% gain in the S&P 500.  Much of this under performance is due to Apple Computer which is down nearly 40% since last fall and at one point was greater than 20% of the total capitalization of the index {QQQ}.

Curiously, if you look at the QQQs on a two year basis they have about the same return as the S&P 500.  Each is up just north of 15% during the past two years.  Longer term indices are mean reverting, meaning that there shouldn't be this much of a difference between the QQQ's return and the S&P 500.  This is especially true when one remembers the growth rate on the Nadaq 100 is in general higher than for the S&P.   This means that either the Nasdaq is going to start gaining on the S&P, or the S&P is going to come back down to the Nasdaq's range or some combination of the two.  

The Nasdaq carries a heavy tech component while some of the best sectors in the S&P 500 for 2013 outside of finance are more defensive in nature.  Probability might indicate then more of a catch up by the Nasdaq, particularly if Apple can put in some sort of bottom now after reporting a not so great earnings outlook going into the fall.   Given this discrepancy in returns, tech is an area of the market that has seriously underperformed and is starting to look interesting.  Will have to do so more research work in this area.

*Long ETFs related to the S&P 500 and QQQs in both client and personal accounts.  Certain clients hold legacy positions in Apple or have we have purchased it for them at their direction.