NASDAQ-100: The Technology-Driven Index

What is the NASDAQ-100?

The NASDAQ-100 (ticker: ^NDX) is a modified market-cap-weighted index of 100 of the largest non-financial companies on the NASDAQ stock exchange. Unlike the S&P 500, which is more diversified across industries, the NASDAQ-100 is heavily concentrated in technology, consumer discretionary, and healthcare sectors. This concentration means the NASDAQ-100 is more volatile but can offer higher growth potential.

The main investment vehicles for NASDAQ-100 exposure are:

• QQQ: Invesco QQQ Trust (most popular, largest NASDAQ-tracking ETF)
• TQQQ: Invesco QQQ Trust 3x Leveraged ETF (3x amplification)
• ^NDX: The NASDAQ-100 Index itself (not traded directly)

Key Characteristics

Technology Concentration: Approximately 50% of the NASDAQ-100 is made up of technology companies. This includes giants like Apple, Microsoft, Amazon, Google (Alphabet), Meta, Tesla, and Nvidia. This concentration makes the index a bellwether for the tech sector.

Growth Orientation: NASDAQ stocks tend to be growth companies—firms that prioritize expansion and future earnings over current dividends. This makes them more volatile but potentially more rewarding over long time horizons.

Higher Volatility: Because of its tech concentration, the NASDAQ-100 experiences larger price swings than the broader S&P 500. This makes it an excellent candidate for the 200-day SMA strategy, which is designed to time entries and exits during volatile periods.

Sector Composition

The NASDAQ-100 includes companies from various sectors, but tech dominates. Here's the approximate sector breakdown:

Pie chart showing the approximate sector breakdown of the NASDAQ-100 index.

Historical Performance vs S&P 500

The NASDAQ-100 has historically outperformed the S&P 500 over the past few decades, particularly during periods of technological innovation and low interest rates. However, it also experiences sharper drawdowns during recessions and periods when investors prefer defensive, dividend-paying stocks. This risk-reward profile makes it ideal for tactical timing strategies.

The 200-Day SMA Strategy on NASDAQ

The 200-day SMA strategy can be particularly effective for NASDAQ investing due to the index's higher volatility. The strategy works the same way as with the S&P 500:

• BUY Signal: When QQQ rises above its 200-day SMA, invest in TQQQ (3x leveraged NASDAQ ETF)
• SELL Signal: When QQQ falls below its 200-day SMA, move to cash to avoid tech sector downturns

For NASDAQ, some traders use a shorter SMA period (like 50 or 100 days) because the tech sector moves faster than the broader market. You can customize your strategy based on your risk tolerance and market outlook through the SPY-Signal subscription settings.

NASDAQ vs S&P 500: Which to Choose?

Choose S&P 500 if: You prefer stability, diversification, and lower volatility. The S&P 500 includes all sectors and is better for conservative investors.

Choose NASDAQ-100 if: You want growth potential and are comfortable with higher volatility. Tech stocks have driven market gains in recent decades, though past performance doesn't guarantee future results.

Best Practice: Many savvy investors track both indices and use the 200-day SMA strategy on each independently, allowing them to be in tech when it's trending and in large-cap when tech is declining.