SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ) are currently trading below their 10- and 20-day moving averages, signaling short-term trend deterioration in U.S. large caps. At the same time, a widely followed momentum indicator focused on breadth and trend quality has turned red and is worsening.
This combination historically aligns with hostile regimes for momentum strategies tied to SPY, QQQ, and dedicated vehicles such as iShares MSCI USA Momentum Factor ETF (MTUM) and Alpha Architect U.S. Quantitative Momentum ETF (QMOM). In prior stress episodes like late 2018, early 2016, and the 2020 crash window, similar breaks below short-term moving averages with weak breadth coincided with choppy, non-persistent price action.
In those periods, large drawdowns and frequent reversals undermined medium-term trend-following systems, while relative performance for momentum factor products tended to lag. More constructive momentum conditions historically emerged only after SPY and QQQ regained their 10- and 20-day moving averages alongside visible improvement in internal momentum gauges, allowing trends in leading large-cap stocks to re-establish and extend.
Terminology
- 01Momentum strategies: Trading approaches that buy recent winners and often sell or avoid recent losers.
- 02Breadth: Measure of how many stocks participate in a market move, up or down.
- 03Drawdowns: Peak-to-trough portfolio or asset price declines over a specific period.