QQQ Sector Rotation

## QQQ Sector Rotation — Full Methodology

### Relative Strength Analysis

1. **QQQ/SPY ratio:** Calculate the trailing 20-day ratio of QQQ to SPY

2. **Ratio trend:** If the ratio is rising (QQQ outperforming SPY), tech is leading

3. **Breadth filter:** Percentage of Nasdaq 100 components above their 50-day SMA must be ≥ 55%

### Entry Criteria

1. QQQ/SPY ratio is rising (20-day slope is positive)

2. Nasdaq breadth ≥ 55%

3. QQQ price is above its 50-day SMA

4. Enter long QQQ at the next day's open

5. Rebalance/re-evaluate weekly

### Exit Rules

- **Sector rotation out:** Exit when QQQ/SPY ratio turns negative for 2 consecutive weeks

- **Breadth deterioration:** Exit if Nasdaq breadth drops below 40%

- **Trailing stop:** 5% below the highest close

- **Rotate to cash (SGOV/T-bills)** when not in QQQ

### Position Sizing

- Allocate 30–50% of portfolio when signal is active

- This is a strategic allocation, not a trade

### Best Market Conditions

Works best during tech-led bull markets (2020–2021, 2023–2024 AI rally). QQQ benefits from secular trends in cloud computing, AI, and digital advertising. Underperforms when value/cyclical sectors lead (2022 energy rally).

### Backtest Notes

Tested on QQQ/SPY relative data from Jan 2015 to Dec 2024. Weekly rebalancing with 0.03% slippage. The breadth filter reduced whipsaw exits by ~30% compared to ratio-only signals.