The Nasdaq 100 Index ETF (QQQ) simply suffered its first correction (outlined as a ten% drawdown from highs) since March and its second of 2026. Under are issues to observe for to determine a possible backside.
Worth Motion Versus Information
“The inventory market is rarely apparent. It’s designed to idiot most people, more often than not.” ~ Jesse Livermore
Because the previous Wall Road adage goes, “If the inventory market have been straightforward, everybody can be wealthy.” Nonetheless, Wall Road isn’t what it appears on the floor. Though fundamentals drive markets, they’re ineffective with out the context of worth motion. Stanley Druckenmiller, who managed cash for greater than 30 years and by no means suffered a down 12 months, explains this idea the perfect:
“So, the technical offers a self-discipline on the basic and the basic offers a self-discipline on the technical. We’re continually following the information. We’re following the basics and in addition the worth motion.” ~ Stanley Druckenmiller
What I’ve found all through my investing profession is that shares and markets are inclined to high when information appears most bullish and backside when the information appears probably the most bearish. Under are two examples from 2026:
Micron Tops on Blowout Earnings Report
In late June, AI chief Micron (MU) reported earnings that blew previous Wall Road estimates. In reality, Micron administration stated that it expects to generate extra EPS in 2026 than it has previously decade. Income grew an eye-popping 346% YoY to a file $41.46 billion. Moreover, the corporate secured 16 strategic agreements price a minimal of $100 billion.
Picture Supply: Zacks Funding Analysis
Though MU shares initially jumped, the blowout report marked the for the inventory and it’s down 34% since.
Picture Supply: TradingView
Equities Backside Regardless of U.S Iran Struggle
An instance of a backside on poor information was the market in late March. On the time, President Trump was threatening to focus on Iran’s oil hubs, mills, and key infrastructure. After weeks of falling, the Nasdaq 100 QQQ started to rise regardless of dangerous information and additional escalations. It wasn’t till April 8th that buyers would totally perceive what the bullish, resilient worth motion was discounting – a ceasefire announcement between the U.S. and Iran.
Picture Supply: TradingView
Worth Motion Versus Information Takeaway
Monitoring the information or fundamentals in a vacuum is futile. As an alternative, buyers ought to monitor the worth motion relative to information. As an example, buyers ought to lean bullish if shares are resilient within the face of dangerous information and vice versa. Presently, shares are falling amid AI and renewed geopolitical considerations. If dangerous information continues to hit the tape and shares start to rally anyway, it might be an early sign to buyers that the market is able to backside.
Sentiment Washout
Shares are inclined to backside when the gang reaches peak bearishness. A wonderful software for monitoring the gang’s sentiment is the AAII Sentiment Survey, which has polled particular person buyers on their market bias weekly since 1987. When shares bottomed in late March, bearish sentiment was overwhelming. In reality, the variety of bears outweighed the variety of bulls for seven consecutive weeks – a particularly uncommon incidence.
Picture Supply: Zacks Funding Analysis
Presently, the size is starting to oscillate again towards excessive bearishness. AAII bears at present maintain a majority at 42.3%, whereas solely 29.6% of respondents are bullish.
Picture Supply: Zacks Funding Analysis
Observe the Fed Liquidity
“Earnings don’t transfer the general market; it’s the Federal Reserve Board…deal with the central banks and deal with the motion of liquidity. It’s liquidity that strikes markets.” ~ Stanley Druckemiller
New Federal Reserve Chairman Kevin Warsh has a popularity on Wall Road as a financial “hawk.” Nonetheless, regardless of elevated inflation considerations from the Iran Struggle and hovering vitality costs, Warsh determined to maintain rates of interest unchanged on Wednesday, signaling that he could also be extra dovish than Wall Road analysts initially thought.
Backside Line
Navigating market pullbacks requires trying past alarming headlines and specializing in how the market reductions data. Whereas timing a backside is rarely straightforward, worth motion, sentiment, and Fed liquidity evaluation enhance the percentages.
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Invesco QQQ (QQQ): ETF Analysis Reviews
This text initially printed on Zacks Funding Analysis (zacks.com).
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
