What Happens to Bitcoin Should QQQ Correct?
- Arthur Hill, CMT
The odds are increasing for a correction in the stock market. This week we looked at three indicators pointing [1] in that direction and provided targets for SPY and QQQ. Small-caps and mid-caps could feel it the most because they are still underperforming large-caps. A broad market correction would also weigh on most sector and industry groups.
The table below shows SPY and the 11 sector SPDRs with the Correlation Coefficient (65,SPY) in the right column. The Technology SPDR (XLK) has the strongest positive correlation (.994), which means XLK almost always moves in the same direction as SPY. Thus, should SPY correct, the chances are very high that XLK will correct, and QQQ by extension.
At the bottom of the table, the Consumer Staples SPDR (XLP) and Healthcare SPDR (XLV) have the weakest correlations to SPY (<. 10). These two may be the most immune to a correction in SPY.
This week at TrendInvestorPro:
- 3 Indicators Pointing to a Correction and Targets for SPY/QQQ
- Tech ETFs Lead the Way, but become very Extended
- Utilities Break Out, Gold Maintains Bullish Pattern, IBIT Support Levels
- The Ultimate ETF ChartLists – Delivered to your StockCharts Account
Bitcoin, QQQ and Correlation
But what about equity alternatives, such as Bitcoin? For clues on Bitcoin, chartists can compare performance and use correlation analysis. The chart below shows Price Performance for the Bitcoin ETF (IBIT) in blue and QQQ in pink. IBIT is the clear winner since January 2024 with a 134% gain. QQQ is up a meager 37.5% (LOL).
The blue shading shows periods when they rose together and the pink shading shows a period when they fell together. Rising and falling together means they are positively correlated. This correlation is especially strong since late March 2025.
The indicator window quantifies this correlation using the Correlation Coefficient (65). This indicator was negative in July-August 2024, but positive since September 2024 and above .50 since March 2025. This shows a strong positive correlation the last five months, which makes sense because IBIT and QQQ are risk-on assets. As such, they will likely rise and fall together.