The price action has been wild and crazy over the past couple of weeks, trapping both bulls and bears with some massive swings during overnight sessions. Tuesday night looked like the entire market was going to gap down, with everything deep in the red. But by Wednesday morning, nearly everything outside of the AI suppliers had clawed back their losses and were positive. On Wednesday’s open most of the market including the hyperspenders absolutely rampaged higher.

QQQ Daily Chart

The speculation on Big Tech is that if the Democratic election wins slow or stop the data center buildout, the Big Tech names could pull back on CapEx spending, which would boost free cash flow. They are also the only players with existing data center infrastructure at scale, meaning those assets could become even more valuable and in demand.

AAPL and MSFT both made new all-time highs on Wednesday with massive moves. Something to keep in mind with MSFT is that it’s forming a large wedge pattern near its highs, with bearish RSI divergence on each successive move higher. I’ll get interested in MSFT again if it pulls back toward $469.

MSFT Daily Chart

AMZN gained 6.51%, which is a monster move, especially considering that following its earnings report, the stock wicked all the way down to $215 in after-hours trading. Just four days later, it was trading around $270, roughly 25% higher.

The gap AMZN just printed will eventually fill. For anyone buying that Wednesday gap higher, the risk/reward was already gone. Those entries were driven by FOMO rather than solid setups and analysis.

GOOGL also had a very solid day but gave up much of its intraday gains, just like QQQ did late in the session. It barely managed to close above its earnings candle and all that accompanying bear volume. I still think the better trade in GOOGL would be to see it falter once again and drop toward $265. The current move looks like a fourth wave within a larger correction.

GOOGL Daily Chart

The Rotation Trade Is Alive and Well

Unlike the hyperscalers, which continued higher throughout the day and held up fairly well, most of the semiconductor names continued to get absolutely wrecked. SOXX closed down another 3.14%, with names like MU, SNDK, STX, AAOI, MRVL, ARM, and SIMO all closing down more than 5%.

SOXX Daily Chart

The rotation trade is clearly still alive and well, which is why the bigger story of the day was actually the strength outside of tech.

DIA closed up 3%, while XLC, IYT, XLF, XLY, XLB, XLP, XLV, and XLRE all had some of their best days of the year. Wednesday’s candles have created a solid line of support and some important levels on which to base trades.

XLF made a new all-time high, while JPM gapped over a whole month of price action and bounced off its 100-day SMA following a gap and go. JPM has now closed above its larger bearish earnings candle and looks like it wants to go higher. As long as it holds the 100-day SMA and Wednesday’s low, the bull thesis remains intact.

If Wednesday’s candles start getting taken out across the board, however, the bulls could have a problem.

JPM Daily Chart

The 2018 Analog Is Still on the Table

If we look back at the 2018 analog, there are still some striking similarities. Back then, the day after the midterm elections produced a 2% up day and a gap above the 200-day SMA on SPY. Price then moved sideways for three days before breaking back below the 200-day SMA and eventually cratering lower into the end of the year.

What this tells us is that just because we had a bullish day on Wednesday doesn’t mean it’s time to chase price higher, ignore risk management, and assume the low is in.

What it does tell us is that Wednesday’s candle and the key moving averages are now more important than ever.

If SPY starts losing its 100-day SMA over the next week, that’s a huge warning sign that something similar could be playing out. We already have a rate hike cycle that is lining up remarkably well with the 2018 comparison, including the potential for another December hike. If we get an election pop followed by another leg lower, that would be a nasty trap for the bulls and could send price significantly lower.

SPY Daily Chart - 2018 Analog

The other key level to watch right now is the 200-day SMA on QQQ. The bulls absolutely do not want to see a daily close below that level. If QQQ loses its 200-day SMA, there is serious trouble afoot once again.

Wednesday didn’t necessarily give us a clearer picture of what comes next, but it did give us much clearer lines in the sand for managing risk and protecting the downside.

I’m more bullish now after seeing Wednesday’s price action. But any close below the key levels mentioned above, and I’ll go right back to being extremely cautious.

Otherwise, as I laid out in Monday’s newsletter, a bottom should be forming over the next week or so. If it doesn’t, risk is quite elevated.

Bitcoin Sends a Bullish Signal

Another bullish signal worth watching is Bitcoin, which printed a large vertical bullish candle off its 100-day SMA and the 120-SMA on the 3-day chart. That 120-SMA is my Bull/Bear Line for the Bitcoin chart.

The continuation of these strong vertical moves higher, followed by choppy corrective moves lower, tells me that BTC is now in a bull market.

It also gives us an even clearer line to use for risk management. Any close below Wednesday’s candle on BTC, and I think it’s likely heading toward the low $70,000s and maybe lower.

As long as that level holds, the next target is the 100-week SMA around $89,000.

BTC Daily Chart

TL;DR: Constructive, But Key Levels Matter

Overall, Wednesday’s candle was constructive for the bulls. QQQ bounced right where it should have, and we saw some massive moves higher across the broader market. This doesn’t look like the price action of a market entering a much larger correction.

However, if we see an immediate close below the key levels outlined above, that will tell us Wednesday was a bull trap. That will be the time to hedge and protect capital, because things could get quite volatile very quickly.

The charts look considerably better than they did Monday afternoon, but some of the double tops are still looming, and the AI trade remains out of favor.

For now, it looks like any bounce in AI will once again be part of a larger rotational market. The other sectors are getting quite heated, and a cool-off in those areas could send money rotating back into AI stocks.

This is not a market to chase moves, though. Wednesday’s intraday price action was a perfect reminder of that.

I’m more optimistic than I was on Monday, but I’m not ready to let my guard down. The bulls have some work to do, and those key moving averages are the line in the sand.

SPY has now closed below its 100-day SMA for two consecutive days, QQQ has just reached its 200-day SMA, and SOXX has sliced through both its 200-day SMA and the key $465 support level. Add in the major double tops forming across the AI trade, and there are plenty of reasons for caution.

SPY Daily Chart

Looking back to 2011, we can see that QQQ has found solid support and pushed higher four times when coming into contact with its 200-day SMA. The other seven times it touched the 200-day SMA, it sliced through and headed lower, usually in fairly short order. That’s not exactly a conclusive edge, but it does tilt the probabilities a little toward continued weakness in tech.

If QQQ breaks its 200-day SMA, it will also be forming a massive six-month double top. That’s a seriously bearish chart pattern if it plays out.

So the big question now is whether this turns into one of the more aggressive bear traps we’ve seen in a while, trapping shorts below the double-top necklines before reversing higher. Or do the very obvious double tops showing up across the tech sector actually play out?

QQQ Daily Chart: 200-day SMA Interactions

Thin Support Below

Support is extremely thin in the AI charts. Take SOXX, for example. There are roughly 12 candles spanning a $100 range that could potentially act as support. That’s not much to work with. The chart might as well have a gap given how little price structure exists in that area.

The next meaningful support is down around $368, another 20% lower. That’s a significant move, but it’s not out of the question at this point.

SOXX Daily Chart

AAPL Earnings

AAPL is gapping down this afternoon following earnings. The market hasn’t cared much about what AAPL does lately, considering it has been one of the inverse AI plays over the past few months. But even AAPL isn’t immune to the bearish pressure hitting tech right now.

The stock may be gapping down into its 100-day SMA and the AVWAP from its prior earnings report. If it can’t hold that area and $317 fails, AAPL could see a proper sell-off back toward its 200-day SMA.

Historically, when AAPL starts getting into that 15-20% drawdown range, the longer-term risk/reward starts to get pretty interesting. Its 200-day SMA is currently about 16% below its all-time high.

AAPL Daily Chart

The Next Round of AI Winners

To sum it up, this market went absolutely bananas in the spring, with many AI charts getting way over their skis. What we’re seeing now is a retest of that massive move, along with the market figuring out which moves were justified and which were driven by hype.

I suspect the market will be much more selective in picking the next round of AI winners. Make sure the names you’re interested in aren’t overhyped, debt-ridden garbage with AI slapped on the side.

The double tops showing up across the market, including SOXX and QQQ, are alarming and warrant caution. These are not patterns I want to ignore, especially with support starting to give way and very little structure below current prices.

As long as the risk of a larger breakdown remains on the table and the bears continue to control the price action, I’ll stay hedged and cautious. The lower we go, the more interested I’ll get in looking for long opportunities. But those positions will be protected, and I’ll be quick to reduce risk if key support levels start breaking.

There will be plenty of opportunities when the dust settles. Right now, protecting capital and staying flexible is the priority.

Friday was an absolute bloodbath. I have been expecting weakness into the end of October, but Friday’s 4.5% cliff dive was spookier than I imagined. AI tech got absolutely slammed, with many of its key players down huge. It seems that what is driving this selloff is almost entirely earnings fear surrounding the AI trade. The market is worried that AI won’t pay off, concerned about the massive spending happening across the space, and increasingly aware of just how much of the entire stock market is being propped up by AI.

What’s wild about all of this is that Big Tech earnings seem to be telling us that spending is going to continue, and continue aggressively. I understand punishing the hyper-spenders for that spending. But the picks and shovels companies got obliterated as well in an indiscriminate AI slaughtering.

QQQ Daily Chart

It seems to me that this sentiment-driven selling is simply a much-needed reset after the AI exuberance we saw in the spring. Once this selling is over, the market will likely become much more selective about the AI winners and losers. The days of buying any and every AI-related company and getting rewarded are long gone.

There is always the concern that this turns into a broad, fear-based liquidity event where everyone runs for the exits at the same time. However, I see several reasons why, barring an actual black swan event, this pullback could be closer to the end than the beginning.

I still will be protecting more aggressively and approaching the market with more caution, especially since the 2018 analog and the 2026 SPY analog I have been tracking are still very much in line with price action. Both could still be playing out. If we start breaking the 200-day SMA on QQQ, the probability of that larger downside scenario increases considerably.

However, if the 200-day SMA holds, or we break below it for a day and then reclaim it a day or two later, I think we could still see a push higher into year-end.

SPY Daily Chart

One reason I think that we are nearing a low is that the entire market is not selling off. We are still in the rotational market that started on June 5th. This is largely AI panic, not broad market panic. In fact, money is moving into consumer-facing names right now, with WMT and COST pushing higher and XLP, the consumer staples ETF, pushing into new all-time highs.

Since this market has been all about rotation, one possible play would be to sell some of those names that have just made new highs and start looking at tech over the next three weeks. We have seen this rotation play out several times since June 5th, with money moving out of one area of the market and back into another. There is a chance we see that happen again.

XLP Daily Chart

The Days After a 4% Down Day on QQQ

I went back through the history of what happens when QQQ makes a 4% move lower in a single day. I know Friday did not officially close down more than 4%, but I started this analysis before the market closed. Given the massive gap lower in QQQ, I still think the data is relevant.

What I found going back to the inception of the ETF is that there are essentially two scenarios that tend to play out.

The first is that we are in a bear market and things are about to get really nasty, really quickly. We saw this during the 2001 crash, the 2008 GFC, COVID, and the 2022 bear market.

Outside of those major events, however, the appearance of a 4% down day has often been followed by a durable low just days later.

The big issue for risk management is that even when durable lows are only days away, the sessions immediately following that initial selloff can bring some serious volatility. In some cases, QQQ has dropped as much as another 10-17% from the initial 4% down-day close before reaching its ultimate low.

A perfect example of this is the Liberation Day crash in 2025.

Thursday, April 3rd, gave us a gap lower and a 5.25% down day. The next two trading sessions brought another 10% decline, with the ultimate low arriving that Monday, April 7th.

QQQ Daily Chart 2025

Another example was the August 24th, 2015 drop, known as Black Monday. That selloff was driven by fears surrounding China’s economic slowdown and Fed policy. After QQQ dropped 4.4% on Friday, August 21st, it fell as much as another 17% intraday on Monday. That marked the low, but wow, nobody wants to be holding overnight when that kind of madness hits.

QQQ Daily Chart 2015

While we did not officially close down more than 4% on Friday, I still think the historical comparison is worth considering.

Looking at the instances where QQQ experienced a move of this magnitude, eight times in its history the selling was followed by a durable low relatively quickly. Four times it was the beginning of something much bigger.

That puts the odds and the historical precedent in favor of finding a bottom around the beginning of November. But that does not mean we cannot go considerably lower before getting there.

There is still a real risk that this develops into a much larger selloff. Many key technical levels have been broken, and real damage has been done to these charts. Be sure to respect the volatility, manage downside risk aggressively, and keep losses small. There will absolutely be opportunities coming out of this selling, but you have to stay in the game and protect your capital long enough to take advantage of them.

Earnings Could Keep Pressure On

We have another round of major earnings coming this week, and considering how badly tech has been punished throughout earnings season, there is certainly a risk that the selling continues.

AAPL reports Monday and is sitting near all-time highs. A breakdown there would be another blow to the market.

However, AAPL is currently being viewed as an escape from the AI hyperspenders. It has been moving inversely to QQQ lately, which gives us some hope that it can continue holding up even if the rest of tech struggles.

That relationship will be worth watching closely. If AAPL can hold its strength while the AI trade continues to unwind, it would be another sign that this is still a rotational market rather than a broad-based liquidation.

As we push deeper into earnings season, we are seeing some major wreckage in the tech sector. It started with META last week, which is now down more than 20% from its September high. Then, on Tuesday, we saw GOOGL fall off a cliff, dropping nearly 13% after a double miss, negative free cash flow, a massive gap lower on guidance, and growing concerns about how AI is going to substantially alter its search revenue. Then, on Thursday afternoon, AMZN got clobbered, falling 8% and, as of this writing, gapping below the 100-day SMA after reporting negative $34 billion in free cash flow. We also had INTC report Thursday, gapping down 23% and creating one of the nastiest double-top island reversals I have seen in a long time.

AMZN Daily Chart

Hyperscalers are being punished for their massive blowout capex spending, and we are not seeing them budge or reel it in one bit. In fact, AMZN positioned itself as an AI company on its earnings call, not the company that shows up at my door multiple times every day. They just guided two years out for AWS, projecting revenue growth north of 40% in both 2027 and 2028, with a path toward becoming a $1 trillion revenue business over the next 5-10 years. AWS is already running at a $184 billion annualized revenue rate. They also announced plans to make Trainium chips available outside of AWS in late 2027, as external demand continues to grow. Jassy called this a “once-in-a-lifetime opportunity” and made it clear that they are going to continue to invest, and invest hard.

It is clear that spending from Big Tech is not stopping, whether the market likes it or not. These massive tech companies will continue pouring money into AI, and those investments will likely pay off in the long run, even if that payoff eventually leads to Skynet taking over the whole world.

Knowing that the spending is not stopping, it is interesting to see the market punishing both the hyperspenders and the companies that supply them. Of course, INTC’s weak fourth-quarter guidance and massive gap down are part of the reason AI suppliers are getting hit. But I also think a big part of this is simply sentiment driven.

Fear is here. The big boys are selling, and that means investors are starting to view all of tech as scary and unsafe. That creates opportunities in my opinion.

I am not saying we cannot go further down. In fact, I will show below how I have been on the wagon of us going lower for the last month. What I am saying is that if AI spending is only increasing, while the rest of the market is holding up across financials, small caps, industrials, and consumer staples, I see this as a buying opportunity until something changes.

Let’s go over three charts that I have been sharing.

The QQQ Q4 Path

First up is the now-famous QQQ Q4 path. I first drew this on September 23rd, and it has been spot on, calling nearly every pivot, every zig and zag, and even the timing along the way.

A ton of charting and analysis went into making that chart. It was not random. But I will tell you, I have done this many times before and been wrong. Sometimes you just have a feel for the market. You are in tune with what is happening, and it works out. This is one of those times.

That chart has us bouncing around the 200-day SMA, but I think it is quite possible that we undercut the July low on QQQ, especially if earnings continue to send key companies lower.

QQQ Daily Chart - Q4 Path

The SPY 2026 Analog

The next chart is the SPY 2026 analog, which I have been sharing for some time now. These two charts are eerily similar, and this analog would suggest a much larger pullback than I am currently expecting for QQQ.

If SPY pulls back to the 200-day SMA, or even lower, that would mean QQQ could be headed to $656 or even $640. I am keeping an open mind to that possibility right now, especially if we see major Iran escalations after the election and oil spikes hard.

We could be repeating the 2018 price action. That is essentially what this analog is showing, with a selloff continuing all the way into the end of the year instead of finding a low in the next two weeks and heading higher into year-end.

How QQQ behaves around the 200-day SMA and how SPY holds at the $740 AVWAP and support will be major clues. Those are two areas I will be watching very closely.

SPY Daily Chart - 2026 Analog

The FOMC Day-After Pattern

The third chart is another QQQ chart that I shared with the RLT Swing Trade Community early this week. It shows how the market’s reaction the day after every FOMC meeting has largely determined the next couple of weeks of price action. We have seen this play out every time but one.

The day after the FOMC meeting has consistently been the key day of price action, and more often than not, it has been a reversal of the actual FOMC day.

This latest FOMC meeting came after tech had bounced for four consecutive days. The market closed with a hanging man candle just above the 100-day SMA. Then, Thursday morning, we gapped below the 100-day SMA, which is never a good sign, and continued trading lower, forming an evening star reversal.

QQQ Daily Chart - FOMC Day After Pattern

Earnings on Thursday after the close are now driving QQQ down toward its key support at $700. That level is being tested once again, and I think this time it is going to break.

Tune into my Friday Financial Forecast video tomorrow to get all of the key levels I am watching across the major indexes and individual stocks.

The second newsletter I published on Substack was on January 29, 2026, titled Hi-Yo Silver, Away, a throwback to The Lone Ranger. In that article, I called the exact top in SLV, which turned into one of the best short trades of my life. I based the analysis on the 2011 and 1980 silver tops.

If you missed it, check out the original article below.

Over the following months, I remained bearish to neutral on SLV based on my 2011 analog. Now, nine months later, almost to the day, silver may be setting up for another long trade using that same analysis.

The 2011 Analog Is Back in Play

In September 2011, SLV sold off sharply but found a low just above the 100-week SMA (orange arrow). We saw something similar this summer, when July’s low formed just before the 100-day SMA. Both bounces rallied roughly 25% to 30% off the lows (blue arrow) before topping out and eventually falling to new lows.

This time, SLV has touched the 100-week SMA, both on our present-day chart and in the 2011 analog (teal arrow). This is the first test of the 100-week SMA since the blow-off top began in February 2024.

If the 2011 analog continues to play out, the risk/reward here looks pretty solid. The upside target is a new high above the $64.31 pivot (green arrow), representing roughly 33% upside from the 100-day SMA.

In 2011, SLV briefly wicked 7% below the 100-day SMA before finding its footing. Even using that downside as a guide, the setup still offers roughly 4:1 risk/reward if the target is reached.

Personally, I’ll use protective puts if SLV closes below the 100-week SMA on a weekly chart. Alternatively, a stop roughly 7% below the entry area would give the trade some room to work while keeping the risk defined.

Gold: Flush or Rush

The gold chart looks like it could have at least one more low into the 100-week SMA. If silver moves with gold, that could push SLV lower before the next meaningful bounce.

For that reason, I want to give my SLV trade plenty of time to develop. I am using shares and longer-dated call options to give it room to work.

In 2011, SLV took about 60 days to reach its target. This time around, I would want to give the trade roughly twice as long, or 120 days. A potential 33% move over that timeframe is not a bad setup in my book.

I will be looking to buy gold in the $3,888 to $3,500 range. I think that area could offer an attractive long-term risk/reward setup for a move to new highs.

The 2011 SLV analog has worked for over a year now, and until that correlation breaks, I’ll continue to treat it as a case of history repeating itself. As always, with proper downside protection and solid risk/reward, I’m comfortable taking the long setup. I can either lose small or win big.

Key Support Levels to Watch

Key supports held on Monday. QQQ held $700, SPY held the 100-day SMA, and SOXX held the 200-day SMA. Those are the levels to watch. If they start breaking, especially with a gap below support, we could see some quick selling down to the next level.

QQQ’s next level of support is the 200-day SMA.

QQQ Daily Chart

SPY’s next level is $740, where we have the AVWAP from the March lows lining up with horizontal support.

SPY Daily Chart

SOXX is a little sketchier from a technical standpoint. I don’t see another solid level of support until $370. That’s because it moved more than $100 in April in just 12 candles, leaving very little structure underneath the current support.

SOXX Daily Chart

TQQQ is also worth watching. It trades at about 3x the intraday moves of QQQ and is sitting right at its 200-day SMA. A break below that level would line up with QQQ losing the key $700 support. TQQQ’s next key support is around $58, which is an area where I’ll look to take profits on short-term puts and add some longs.

Patience Into Earnings and the FOMC

With key earnings from the hyperspenders and the FOMC meeting this week, its ok to take a step back and waiting for more data. Will you possibly miss the exact low? Yup, for sure. But if this turns out to be a durable low, there will be plenty of time to get back in and plenty of upside left.

There’s real value in having the peace of mind that comes with not buying unprotected into major binary events like earnings and FOMC announcements, especially when none of us has any idea how the market will react.

I’ve added into this current support, but if we start taking out the levels I outlined above, the risk increases that we could be entering some kind of 2018-style liquidity event.

QQQ 2018 Analog

I know a lot of stocks are already very low, especially in the high-beta and AI space. But when liquidity events start, oversold doesn’t matter. People just want out, and fear takes over.

I’m not hoping for anything nearly as dramatic as 2018, but I wouldn’t mind a little more selling to fully reset sentiment and set us up for a nice bull market into 2027.

As always, I’ll be watching the key levels and hedging when they break. There’s still a real risk of further selling in a lot of these charts, and the macro picture isn’t helping.

Friday brought us more selling across all sectors of the market. For months now, dating back to June 5, we have been stuck in a rotational market where tech and financials, among other sectors, move in opposite directions.

On the chart below, you can see how this has played out. During the green period in 2025, tech and financials were moving together and pushing higher. This was a full-blown bull market, the kind of environment where you want to be fully invested and riding stocks higher.

In the red-shaded area at the start of 2026, both tech and financials started moving lower together. That was the time to raise cash, hedge positions, and be more cautious. We then got another green period where both sectors moved higher together, but this time it lasted less than a month instead of most of a year like we saw in 2025.

After that, we entered the rotational market we have been dealing with since June. Tech moved higher in purple while financials moved lower, then financials moved higher in orange while tech moved lower. We got another stretch where tech pushed higher (purple), while fincials sold off. Now, at the start of October, we have another yellow zone where financials are moving higher while tech moves lower.

QQQ vs XLF Daily Chart

With the wild macro picture unfolding right now, it is no wonder we don’t have a raging, full-blown bull market. The uncertainty around interest rates, inflation, the election, data center financing, political opposition to data centers, the war in Iran, surging oil prices, skyrocketing bond yields, and a strengthening dollar all create a backdrop where some caution is warranted.

Tech has taken quite the beating. However, anyone who trades tech knows the pain can last much longer and go much deeper than anyone expects. Just because stocks have already fallen doesn’t mean they can’t fall further. Knowing that, it looks like tech is nearing some kind of bottom.

In my opinion, the best-case scenario would be a bearish week or two where financials and the broader market sell off alongside tech. It would give us another red box on the chart above, reset sentiment, push fear to a maximum, and open the door for another green stretch into the end of the year.

The goal is to get the whole market working together again, this time to the downside first, so we can potentially get a much healthier move higher afterward. A two-month run into the end of the year with tech, financials, and the rest of the market moving together would be a much better trading environment than what we have seen since June 5th.

Earnings Take Center Stage

This is a big earnings week, with MSFT, GOOGL, SKHY, NOW, VERT, GEV, INTC, AMZN, SNDK, and more reporting. The biggest market movers of the bunch will likely be MSFT, GOOGL, and AMZN, which report Wednesday and Thursday. All eyes will be on their capital expenditure numbers and what they tell us about the future of AI spending.

MSFT will likely be the ultimate winner in enterprise AI and is likely to stay cash-flow positive, which this market should like, as it continues investing in the space.

GOOGL should be a winner in consumer AI, but the spending required to compete is pushing them cash flow negative. Google needs to quickly get its Agentic AI products out there and competing with META’s Muse. Every major tech company will have its own version of this, and the race to build and deploy these tools is only getting more competitive and more expensive.

AMZN will likely put up strong numbers on the retail side, especially with consumer spending holding up and the company ramping up seasonal hiring. But retail is not the main story with Amazon anymore. AWS and AI are where the market will be focused, particularly when it comes to capital expenditures and the returns Amazon expects from those investments.

This week’s reports should go a long way toward determining whether tech can find its footing or whether the selling continues.

I’ll update these charts in my newsletters and videos just before earnings, so we can see where each stock stands technically heading into the reports.

“Are you not entertained!” I yell at my screen all day Thursday as calamity and carnage crash into the tech sector. Holy smokes, what an absolute massacre of the AI bulls. I have been expecting weakness, but even I was amazed by the sea of red that showed up in tech on Thursday.

The wildest part of this whole sell-off is that it is almost entirely concentrated in AI tech. However, since AI tech names are now some of the biggest components of the SPY and make up roughly 35% of the QQQ (excluding AAPL, since it is not part of the hyperspender issue we are seeing), that weakness is having a major impact on the broader market.

QQQ Daily Chart

If you were long KRE, the regional banking ETF, you absolutely crushed it on Thursday. It has a very solid double bottom that just broke back above the 200-day SMA and is surging higher alongside the big banks (XLF). We also saw massive days in XLP (consumer staples), XLU (utilities), IYT (transportation), and XLB (materials). IWM essentially closed flat on the day, although it is still stuck firmly below the 200-day SMA. As long as it holds below that level, the door to another low is wide open.

KRE Daily Chart

SOXX, on the other hand, fell 6.79%, while MAGS dropped 3.35%. Fear is certainly here, but it is concentrated in one area of the market. That is another reason I don’t think the market is simply going to fall off a cliff and drop 20%. Money is rotating around, just as it has been since June 5, when the market dynamics shifted from a full bull market to a rotational bull market.

SOXX Daily Chart

Big Tech Is Just Above Key Support

I have been focused on some of these rotational moves lately, like XLU and XLF, but the big reason I generally focus on big tech is that it remains the main market driver. These are the companies that can make or break the market.

When I look at the tech charts right now, most are at or getting close to a fairly key support level.

• NVDA is 4% away from its 200-day SMA.

• GOOGL is 5% away from its $305 gap fill and horizontal support.

• MSFT is 4% away from its horizontal support zone and AVWAP at $500.

• AMZN is 4% away from its gap fill at $240.

• TSM is just over 3% away from its 200-day SMA.

• AVGO is 4% away from its 100-week SMA.

• META hit its 100-week SMA and is less than 3% away from its long-term daily moving averages.

On the ETF side, we can see that:

• SOXX pretty much hit its 200-day SMA on Thursday.

• QQQ is just under 4% away from its 200-day SMA.

• SPMO, the momentum ETF, is just 1% away from its 200-day SMA.

GOOGL Daily Chart

All this is to say that, despite the fear showing up in a big way, I think we are getting close to some kind of low in the market. Many names have dropped into my buy zones, some are just above them, and others still have a bit to go, like MU.

The best-case scenario would be a flush lower, where AI names keep getting sold, the other rotation names also pull back for a week or so, and then the whole market can move higher together into the end of the year, just as it did in March, April, and May.

Even if we stay in a rotational market, we should be getting some kind of short-term low in tech over the next week or so that would allow for some buyable setups.

The 2018 Analog Is Still on the Table

I think the worst-case scenario is that we are in the 2018 market all over again and are in for a steeper sell-off and a bigger fear event, where all of the support levels above break. After all, we are tracking that sell-off almost to the day.

However, even in that scenario, it is likely we are somewhere around the purple arrow, October 24, 2018. It is kind of wild that we are sitting here on October 22, 2026, looking at a similar setup.

If we continue to follow the 2018 analog, we should see some more selling below Thursday’s close, perhaps down to the 200-day SMA, before a bounce. That bounce would likely form a lower high at the 100-day SMA, or even briefly trap bulls above it, before selling resumes and we break below the 200-day SMA.

That selling would push QQQ below its 200-day SMA and undercut the July low, just as we saw in 2018 when the market broke below that year’s February low before bouncing.

QQQ Daily Chart & 2018 Analog

Both scenarios are still on the table. Either we find a durable low in the next week or two, or we bounce, break key support levels, and head lower into year-end like we did in 2018.

For now, I am treating this sell off as a buying opportunity. Historically, the third year of a presidential term has been the most bullish, and I am keeping that bigger-picture context in mind as we manage this tech sell-off.

The tech bulls have taken a beating, but the main question now is whether these key support levels can hold. We are at or getting close to some important buy zones, and the next week or two of earnings should tell us a lot about where this market is heading.

SPY and QQQ Are Still Stuck in the Chop

Tuesday and Wednesday brought some slight bullishness to the market, with SPY and QQQ now pushing toward the top of Friday’s candle. QQQ has reclaimed the 100-day SMA but is still below Friday’s high and has retested the broken trendline from below. This market is still very much in the chop zone.

If we pull up the SPY chart, the current price action looks extremely similar to the last chop zone we entered last fall. We can see the two big bearish candles that ended the euphoric, one-way uptrend and kicked off a much choppier, more challenging market (red arrow). From there, SPY pushed higher into new all-time highs before dropping to the 100-day SMA. That was followed by two more higher lows that stopped just short of the 100-day SMA, with each push barely managing to make another all-time high.

SPY Daily Chart

I think we are either at the blue arrow or the purple arrow on the chart now. If we are at the blue arrow, SPY could push higher one more time while QQQ puts in a lower high, followed by another rotation lower across many of the names that have been holding up well. Or, we are already at the purple arrow and will break the 100-day SMA on SPY, pushing down toward AVWAP near $738 or possibly even the 200-day SMA. If this correction has more downside, I don’t expect it to get much steeper than that under my primary market thesis.

QQQ Daily Chart

One More Flush in Semis?

One reason I think we could see another push lower is that SOXX and many of the semiconductor and AI names look like they need one final move into key support before finding a durable bottom and pushing higher into year-end. INTC and MU are two great examples of charts that are clean and relatively straightforward. SOXX itself also looks like it needs one more small flush lower. That would make the current consolidation a bear flag, followed by another low into the 200-day SMA sometime next week or possibly the week after.

Keep in mind, I see that as the end of a larger correction, not the start of a new downtrend. My target for SOXX on the next major move higher is $776, roughly 65% above the 200-day SMA. However, if SOXX breaks below the 200-day SMA decisively, it enters no-man’s-land, with very little historical support to lean on. At that point, who knows where it could finally find a bottom.

SOXX Daily Chart

Earnings will dictate whether the low is already in or if we have another leg lower to go. LRCX, a decent size name in the AI space, is gapping down roughly 5% as I write this. It has a similar look to INTC and SOXX, suggesting it could be in the final fifth wave of its C wave lower. Unlike MU and INTC, though, LRCX is already below its 200-day SMA, so it doesn’t have that key moving average to act as support on another drop. There is a gap at $225 that could provide solid support if the selling continues.

LRCX Daily Chart

Staying Patient

META reported earnings and bounced nicely on the report, but the market as a whole has hardly moved. With SPY and QQQ still trading inside Friday’s candle, I don’t see much of an edge without a gap in either direction. There simply isn’t much new data to work with until price gives us a clearer signal.

Since I see several charts that could use one more push lower, I’m still holding cash so I can buy that drop if it comes. At the same time, I’ve been buying small positions into key support levels on names like NVDA, AMD, SIMO, MU, SNDK, PANW, and NET, along with the ETFs I like to trade: SOXX, XLK, TQQQ, and QQQ. I don’t want to be sitting completely on the sidelines if that final flush never shows up.

PANW Daily Chart

Always Mitigate Risk

Of course, when I talk about a final flush, I’m hoping it’s just a nice push down into the 200-day SMA on SOXX and many of the semiconductor names before they find support and start moving higher into year-end. But I also need to be prepared if that doesn’t happen.

For risk management purposes, I want a plan in place in case we end up in a 2018-style scenario where the bottom falls out and the market continues selling off into year-end. That’s not my primary expectation right now, and I’m not seeing signals pointing decisively in that direction. Still, it’s a scenario I keep in mind when formulating my risk mitigation plan for every trade I take.

For now, I’m staying patient, keeping some cash available, and adding small positions where the charts offer good support. If we get that final flush, I’ll be ready to take advantage of it. If the market turns higher without giving me that opportunity, I already have some exposure. And if things get worse, I know what key levels will act as my hedge triggers.

Monday’s price action showed us a few things. First, it suggested we were not in a massive liquidation-style market that would bring Black Monday vibes, with a huge gap down followed by another wave of selling. I wasn’t totally ruling out that possibility, especially after Friday’s close, but it was not my base case. Second, it showed that the choppy market we’ve been dealing with for months is still very much in play. Third, Monday was essentially a retest of Friday’s sell-off and didn’t give us much of a decision either way. Many names formed inside candles, leaving the next directional move uncertain.

SPY Daily Chart

Right now, QQQ has pulled back 7% from its all-time high to Friday’s low. SPY is down just under 3% from its all-time high, while SOXX, the semiconductor index and a key index to watch during the AI boom, is down nearly 20%. Unlike QQQ and SPY, SOXX never made a new all-time high this summer.

As of right now, the evidence does not point to Friday’s sell-off marking a durable low in the market. Friday’s low broke several key support levels, and unless we gap back above Friday’s candle this week and hold, further downside remains the more likely outcome.

QQQ Daily Chart

The Catalysts Ahead

That brings us to the catalysts over the next few weeks. First, we’re in the middle of earnings season. META, TSLA, and SPCX are the key names reporting this week. META is likely to be the biggest market mover of that group because it’s one of the key hyper-spenders driving AI capex. The market will be looking for clues about the health of the AI trade and whether the massive investments in AI infrastructure are starting to pay off. META could even report negative free cash flow, so the market’s reaction will be particularly important.

Next week, we have the FOMC meeting. Rates are extremely likely (82%) to remain unchanged, barring a major development over the next 10 days. That means attention will turn to the Fed’s projections, the dot plot, and any predictive comments from Warsh.

2018 Analog

I can’t ignore the similarities between the 2018 rate-hiking cycle and today’s market. Both markets were topping out around October, and both periods involved a new Fed chair. In both cases, rates were held steady in October/November, while a December hike was/is expected. In 2018, the Fed ultimately hiked in December before Powell pivoted toward a more dovish stance on January 4, 2019, which helped the market finally bottom out after a 20% decline

There are other similarities worth keeping in mind. Both periods fall during Trump’s midterm years, and both featured rising oil prices, yields, and inflation. Mega-cap stocks were carrying the market, although that particular similarity applies to 90% of the time.

None of this guarantees we’ll repeat the 2018 playbook, but it’s an interesting historical analog, especially if QQQ cannot reclaim its 100-day SMA over the next week or so.

QQQ 2018 Analog

More Volatility Ahead

Regardless of what happens next, I expect a good bit of volatility over the coming weeks. I’ve started layering into some shares at depressed prices, but I also have buy orders sitting lower in case the market continues to fall. I want to take advantage of weakness without getting too aggressive before the market confirms a low.

If key names like NVDA, AAPL, GOOGL, and MSFT start breaking down, the likelihood of the broader market heading toward its 200-day SMA increases significantly.

Relative Strength of MU

One name I’m watching closely here is MU. It showed a lot of relative strength on Friday and Monday. I’d prefer to buy shares at lower prices, but the setup looks interesting in the short term as long as it holds the AVWAP from the low at $847.

The first upside target is the 100-day SMA and gap fill near $977. That gives us a clear level to watch while keeping risk defined around the AVWAP support.

MU Daily Chart

For now, patience is key. We’ve seen a bit of a bounce, but we haven’t seen enough follow through from the bulls to declare the low is in. I’m willing to start building small positions at attractive prices, but I’m keeping cash available and hedging XLK and QQQ until the market gives me a signal that its not heading lower.

Do you all remember Thursday, when I wrote a full newsletter explaining why Thursday’s candle should mark at least a short-term low? I also said that if it didn’t, that would be a warning signal for the markets. Whenever we get a strong candle at a key level with strong volume, you don’t want to see that candle break in the following week. But a very next ay breakdown?! That spells trouble.

The bears have shown up, and they showed up hard! Friday’s candle kneecapped the bulls, closing below key levels across the board on massive volume. The only hope for Friday’s low holding is that we get a scenario similar to July 29 2026, when the market formed a bear trap. If Monday gives us a gap and go above the 100-day SMA and closes fully back above Friday’s candle, consider Friday a trap. No matter what, we need to reclaim the 100-day SMA early in the week, within the next two, maybe three days based on past historical price action. Otherwise, the likelihood of QQQ hitting its 200-day SMA increases drastically.

That said, the move lower probably won’t be a straight shot down. At least, that’s not the most likely scenario. If we look back at the most recent breaks and closes below the 100-day SMA, we can find several examples of how this might play out.

QQQ Daily Chart

A Look Back in Time

July 29, 2026: The Bear Trap

This was the most recent break below the 100-day SMA, and it turned out to be a bear trap. Price closed below the 100-day SMA before reclaiming it the very next day. This is the type of scenario the bulls need to see again if they want to avoid a deeper correction.

February 4, 2026: The Start of a Deeper Correction

Earlier this year, the February 4 candle started the final leg of the drawdown. Price bounced toward the 100-day SMA for several weeks but couldn’t break back above it. Eventually, the market sold off into a 10% correction before resolving higher. I think this type of price action makes a lot of sense as a potential analog for today, given the similarities in the patterns we’ve seen develop.

February 27, 2025: The Breakdown Before Liberation Day

This candle closed strongly below the 100-day SMA, retested the moving average from below the next day, and then pushed lower into the eventual crash surrounding Liberation Day. This is a reminder that a failed retest of the 100-day SMA can be a warning that more downside is coming.

September 6, 2024: A Quick Reclaim Marks the Low

This candle broke strongly below the 100-day SMA after two bullish candles had closed just beneath it. It was a bearish setup, but the candle actually marked the low. Price formed two inside bullish candles, then closed back above both the 100-day SMA and the bearish candle two days later, with increasing bullish volume.

One important detail here is that the market had tested the 200-day SMA the month before. This example reinforces the importance of quickly reclaiming the 100-day SMA if the market is going to establish a more durable bottom.

August 5, 2024: A Gap Down and Capitulation

This was the prior time price closed below the 100-day SMA, and it was a particularly ugly setup for the bulls. The market gapped below the 100-day SMA, which is always a bad sign. That move led to a 7.5% drop over just two candles, pushing price into the 200-day SMA. The following day brought another 5.42% gap down, making this a good case study in gap-down capitulation.

April 19, 2024: Another Quick Reclaim

Price closed below the 100-day SMA, formed one inside candle, and then closed back above the moving average the next day. Once again, this reinforces the idea that if the bulls are going to turn a breakdown into a bear trap, they need to step in quickly and reclaim the level within the next couple of days.

September 21, 2023: A Longer Stay Below the 100-Day SMA

This time, price also gapped below the 100-day SMA. Rather than quickly reclaiming it, the market spent several weeks below the moving average, filled the gap, and then rotated lower toward the 200-day SMA near the end of October before finally finding a durable low.

Those are the seven key breaks below the 100-day SMA since the 2022 bear market lows. In four of those examples, price continued lower toward or below the 200-day SMA. In the other three, price quickly reclaimed the 100-day SMA. Essentially, the initial close below the 100-day SMA is less important than what happens over the several days that follow.

We can go back even further and find many more examples that fall into one of these two categories.

Either price quickly reclaims the 100-day SMA and avoids making significantly lower lows, as we saw on October 4, 2021, May 12, 2021, March 4, 2021, and August 5, 2019.

Or price spends several days below the 100-day SMA, fails to reclaim it, or briefly gets back above it before breaking down again. These scenarios often lead to new lows and a move toward the 200-day SMA. The October 10, 2018, breakdown is an interesting analog to today’s price action in several ways, from the technical setup to the broader macro landscape, including the fact that both periods fall during Trump’s first midterm year.

What Comes Next?

Given how many key levels broke across the board on Friday, its less probable that this is simply a bear trap. However, many charts are extended to the downside, and we likely have significant liquidations contributing to the selling pressure. That means we could still see some large snapbacks in price this coming week, even if the broader correction isn’t finished.

Whatever happens this week, I expect volatility and some big moves. In the best-case scenario, in my opinion, we get a waterfall move lower for several days, resetting prices in semiconductors and AI names, spiking fear, and ultimately setting up the broader market and multiple sectors for a run higher into the end of the year.

Once again, my analysis suggests this dip should be buyable. The question is how deep we go before finding the bottom.

SPY down to $700 would fit the New Rate Hike Regime model, but that would require a bigger pullback that I am currently anticipating. Anything is possible, and that would be a prefect retest of the prior all time high, which should happen eventually, but that is not my base case right now.

Instead, I think SPY in the $740 to $726 range and QQQ in the $675 to $655 range over the next few weeks make a lot of sense as potential downside targets.

The big thing I’m watching is whether the market can reclaim the 100-day SMA quickly or whether we spend several days below it.

Volatility has entered the market. Pretty much all of tech gapped down hard at the open on Wednesday, with QQQ opening near the 100-day SMA, just as I speculated in last night’s newsletter.

The QQQ opened in the sketchy zone, far enough below the 100-day SMA that things could have gotten dicey for the bullish fade higher. However, buyers stepped in shortly after the open and relentlessly bought stocks throughout the day.

QQQ Daily Chart

I think there were two big reasons for the reversal. First, a lot of stocks were gapping directly into key support levels. Second, many tech names were simply extended to the downside and due for a bounce.

XLK gapped right into its 100-day SMA and the point of control from the March low, where there is a massive volume shelf. It bounced off that level and held up throughout the day. Like much of tech, XLK printed a large bullish candle off key support.

The low of Wednesday’s candle is now the key level to watch. Those lows should hold if we’re going to get at least a several-day bounce from here. I am long XLK and looking for the bounce.

XLK Daily Chart

The Rotation Trade

Thanks to the rotation we’ve been seeing, SPY is holding up extremely well. In fact, I expect SPY to make a new all-time high if we get a sustained bounce from here.

That would likely correspond with a lower high in QQQ, followed by potentially one more rollover to a new low. If that happens, it could create a very buyable dip.

SPY Daily Chart

IWM: Small caps remain within the buy zone I laid out and bounced off the prior all-time high. While IWM is below its 200-day SMA and risk is elevated, as long as it holds Wednesday’s low, I see potential for a move toward the 200-day SMA and the $280 gap fill.

XLI: Industrials came down and filled the gap below that has been looming on this chart since March. It then gave us a large bullish hammer candle, with plenty of room to move higher before reaching the 200-day SMA.

Once again, below that hammer candle, things get really dicey. However, as long as the hammer holds, I could see XLI pushing toward the 200-day SMA or even the 100-day SMA. That would also bring the $176 area into play for a potential double-top neckline retest before another rollover.

XLI Daily Chart

Semiconductors

SMH has been the main source of weakness in the market lately. Thursday’s sell-off was large, but buyers did step in.

The volume on Wednesday’s SOXX candle suggests we may have a short-term low in semiconductors. A bounce toward the 100-day SMA from below would make sense before another potential move down toward the 200-day SMA.

Could a durable bottom already be in? Absolutely. However, the pattern is now moving vertically lower, followed by choppy price action to the upside. From a technical perspective, I have to err on the side of caution and expect further downside until we either hit our downside targets or start seeing those sharp, vertical moves higher.

SOXX Daily Chart

Individual AI Names

MU: Micron filled its August 12 gap and then ripped higher, actually closing green on the day. Despite that massive candle, I think MU could still have a little more downside in the larger pattern.

It formed a choppy rising wedge, which it recently broke below, and then gapped under the 100-day SMA. Stocks don’t go straight down, so I think we’re seeing a retracement of some of that weakness. However, another rollover toward the 200-day SMA and the July lows remains possible.

If that happens, I would consider it a buyable drop.

MU Daily Chart

INTC: Intel has a similar setup in play. If it drops into the major gap below, it could present a stellar buying opportunity. There are tons of other AI names setting up in a similar fashion, some further along in the pattern and others holding up for now.

INTC Daily Chart

AMD and NVDA: On the relative-strength side, AMD and NVDA bounced nicely on Thursday off their 100-day SMAs. Their charts look a little different from the broader semiconductor and AI group, which is worth paying attention to.

However, if we get another leg down in the market and AI names, I don’t see them holding on to today’s support. Both names still offer solid setups for a move higher, and are in the select few that have actually pushed to new all time highs recently.

AMD Daily Chart

SIMO, ARM, AMAT, and AAOI: On the relative-weakness side, these names are further along in their corrective patterns and are getting very close to their July lows. If we see another push lower, these ultra-volatile names could get hit hard one more time.

The Big Picture

Overall, I think semiconductors should bounce here. If they don’t, and Wednesday’s lows break over the next week, I would be watching for a waterfall move lower.

Longer term, this is developing pretty much as expected. If we can get one more meaningful sell-off in tech while the rest of the market continues to hold up, it could set us up nicely for a stronger run into the final two months of the year and into 2027.

Historically, the third year of a presidential term has been the strongest of the four-year cycle, although that is a seasonal tendency, not a guarantee.

For now, I’m watching Wednesday’s lows, the key moving averages, and whether the rotation trade continues to hold up. There are some great opportunities setting up, but patience and risk management matter even more when volatility picks up.

The selling picked up on Wednesday after Tuesday gave us a retest gap that faded for most of the day. Wednesday’s hot CPI report increased concerns about another Fed rate hike in October, sending the market back into panic mode at the thought of higher rates. QQQ closed nearly 2% lower on the day.

It has been my thesis since the initial rate hike on September 16th that the market would see some decent selling. Historically, every one of the six prior new rate-hiking regimes over the past 30 years has brought a drawdown, with SPY falling an average of 7% from where it stood on the day of the initial hike.

SPY Daily Chart

It’s possible we don’t see a sell-off that severe this time around. However, a drawdown that retests the July lows in QQQ and pushes below them in SMH seems entirely reasonable, especially after the massive move higher we saw in March and April.

The interesting thing about these historical rate-hike sell-offs is that every single one eventually created an incredible buying opportunity, even the worst-case scenario around the dot-com bubble peak.

We also know that stocks have historically tended to find bottoms early in Q4 and deliver solid November and December returns during midterm years. The obvious exception is 2018, when the market continued selling off into the end of the year, with the eventual bounce not getting underway until Christmas Day.

This is why historical analogs and past price action can only take us so far. History gives us a framework, but we still have to rely on current price action and the key support levels on the charts in front of us.

Speaking of historical analogs, this price action and overall sentiment feel eerily similar to the market into the end of 2025.

The October 10 weakness in 2025 marked the beginning of a massive period of consolidation and distribution. This time around, our starting point was the massive bearish candle on July 5.

Last year, the market chopped higher for roughly 143 days before finally breaking below the 100-day SMA and beginning its eventual drop lower.

We’re currently 132 days into this period of chop and nearing the 100-day SMA once again.

The similarities are hard to ignore. If this analog continues to play out, we could be getting closer to a more meaningful pullback. Of course, history doesn’t have to repeat itself, so I’ll be watching the key moving averages and support levels to see whether price confirms the pattern.

SPY Daily Chart

Short Term QQQ Levels

In the short term, the best-case scenario for a tradable bounce would be a gap down on Thursday into QQQ’s 100-day SMA.

Gapping into that kind of solid horizontal support, combined with a major long-term moving average after a fairly steep decline, is the type of setup where I’d expect buyers to start stepping in. Shorts should cover, longer-term investors may begin adding exposure, and we could see the gap start to fade as the day progresses.

If QQQ gaps below that level, however, the picture changes. A gap of more than 1.5% below such an important support level would be yet another bearish signal and would likely mark the beginning of a move toward QQQ’s 200-day SMA.

The reaction at the 100-day SMA will be important. Set your alerts now.

QQQ Daily Chart

QQQ & SPY Are Key

One thing to remember: when SPY and QQQ are selling off hard, the average high-beta stock isn’t going to suddenly bounce just because it reaches a horizontal support level you’ve drawn or a moving average you normally trade against.

Those levels can work beautifully in a bull market, but many high beta stocks like CRWV, ALAB or IREN are not necessarily trading in healthy bullish environments. Many of the high-flyers from May have come back down to earth, which is exactly why focusing on quality and relative strength matters so much.

When fear really enters the chart, risk management becomes even more important. You cannot easily evaluate individual stocks in isolation and expect your usual technical levels to work the same way regardless of market conditions.

Pay attention to what QQQ, SPY, and SMH are doing. Those charts will help determine how much risk you should be taking in individual positions.

I tell you what, if I have to type the word rotation too many more times this year, I may lose my mind. You know how, when you’re buying a house and have to sign your name 100 times in a row, you start questioning how to spell your own name? That’s about how I’m feeling with this word. This market has been all about rotation since June 4, and it doesn’t seem to be quitting.

The rotation trade held up once again on Monday, with RSP and DIA pushing higher while SOXX gapped below its 100-day SMA. AI names were hit hard, with many of the most popular high-beta plays down double digits.

SOXX Daily Chart

However, part of Monday’s wild price action can be attributed to the fact that it was Columbus Day. SPY traded just 18.53 million shares, its lowest full-day volume in 20 years. For comparison, on October 11, 2004, which was also Columbus Day, SPY traded 20.25 million shares.

The bond market was closed, bank earnings are right around the corner, and we’re already in a choppy consolidation period. Monday’s price action was bound to be a little wonky. When volume is this light, it doesn’t take as much selling pressure to push prices lower, and individual stocks can make bigger moves than they might under normal trading conditions.

Tuesday’s price action should give us a better read on how the rest of the week might unfold.

Big Tech Holds Up as Semis Struggle

To sum up our current market action, Big Tech is holding up fairly well, keeping QQQ strong and just off its all-time highs. SPY is holding up even better because, in addition to Big Tech holding firm, we’re seeing rotation into other areas of the market, including utilities, energy, financials, and consumer staples.

SPY Daily Chart

Semiconductors and the broader AI trade have been weak lately, and most semiconductor charts look like they could see more selling back toward the July lows. Only some of the largest names, including NVDA, TSM, and AMD, have pushed back toward all-time highs as investors continue to favor them over smaller, higher-risk names in the group.

If those leaders finally give way and the smaller names see another leg lower, it could drag QQQ down further. However, SPY could hold up relatively well, just as we saw in June and July, when weakness in certain areas of tech was offset by strength elsewhere in the market.

QQQ Daily Chart

Still Bullish, But Risk Is Elevated

I’m still bullish overall, and I’ll use a broader market drawdown, particularly in some of the strongest tech names, as an opportunity to add exposure. That doesn’t mean buying blindly. I’ll continue to respect key technical levels and use them to define and manage risk.

Some of the AI names that went almost straight up will be harder to manage from a technical perspective if they start breaking down. When price moves that quickly, it leaves behind very few established pivots and support levels to trade against. That makes it harder to identify where a trade is invalidated and where to place a logical stop.

SOXX’s move from $368 to $468 is a perfect example. Price moved through that level in 19 trading days, so the chart has relatively little historical price action there, leaving limited horizontal support. If SOXX breaks below its 200-day SMA, the technical risk increases significantly because there are fewer established support levels to lean on.

For now, I’m playing the rotation, respecting the key moving averages, and staying patient for better buying levels in tech.

The rotation I have been watching picked up on Friday, with the Dow Jones Industrial Average (DIA), XLF (financials), IGV (software), XLY (consumer discretionary), and XLU (utilities) all closing nicely higher.

IWM Daily Chart

Out of all the sectors I watch, only SOXX (semiconductors) and XLE (energy) closed in the red on Friday.

This rotation makes a lot of sense considering how oversold many of these sectors had become. RSP had seven consecutive down weeks and nearly retested its 200-week SMA and its prior all-time high from January. At the very least, a short-term bounce was a high-probability trade.

Earnings season kicks off this week with the financials reporting, which means XLF will be at the top of my watchlist. As long as it holds the 100-week SMA, which is now about 4.5% below current price, I see XLF as a buyable dip within a choppy uptrend.

XLF Daily Chart

Does AI Hold Up?

The main question at this point is whether SOXX and the AI trade can hold up and push higher from here. SOXX is sitting right on top of its 100-day SMA and a key support zone. As long as it holds $525, it remains in good shape for another push higher in the short term. However, a break below that level would open the door to a drop toward the 200-day SMA.

I honestly have no idea which way SOXX will go. Many semiconductor and AI names look like they could use one more leg down to complete their larger corrective patterns, but that doesn’t mean it will happen. If AI stocks have taught us anything, it’s that they can be incredibly resilient and keep pushing higher despite all expectations.

I know that if we get that final drop in these names, potentially creating double bottoms with the July lows, I’ll be looking to use that opportunity to add long exposure and deploy my remaining cash into the market.

However, if that drop never comes, SOXX is sitting at the 100-day SMA, a level where it has historically found support and bounced. In that scenario, adding some exposure with solid risk mitigation in place is the play in my opinion.

SOXX Daily Chart

AI and Semiconductor Names to Watch

GOOGL: If GOOGL can finally break above the 100-day SMA, I think it sets up for a solid trade toward the $375 brick wall that has held price down since May.

GOOGL Daily Chart

AMZN: Amazon just gave us a solid double bottom. As long as it holds the 100-day SMA, the play is to get and stay long. Remember, earnings for these names are coming at the end of October, so keep that on your radar.

NVDA: If we get a continued dip in NVDA, I think it’s a solid buy around $221 and $214. Below the 100-day SMA, things get a little dicey as we try to determine which pattern is playing out. However, $214 is a major support level. If NVDA drops that far, I suspect we would also be seeing that next leg lower in SOXX.

AMD: AMD may be starting to cool off a bit. It has a gap fill around $560, which I expect to get filled. That puts the potential buy zone between the prior all-time high around $585 and the 100-day SMA at $519. That’s a wide zone, so how aggressively you approach this trade will depend on your trading style and time frame. As long as AMD holds the 100-day SMA, it still looks good for a push toward $685, the 1.618 expansion of the recent drop.

AMD Daily Chart

INTC: Intel just broke below its 100-day SMA, so risk is elevated here. However, it still has a pattern in which price pushes higher and makes new highs. Buy zones and stop placement are a little trickier in the short term. The best-case scenario, though not necessarily the highest-probability outcome, would be a drop toward the 200-day SMA and the gap fill below. That could present a very solid longer-term buying opportunity.

Stay Patient

There are lots of great plays in the market right now. It hasn’t been the easiest market to trade lately, but there are still good opportunities if you know where to look and have the patience to let charts and trades play out.

COST was a brilliant trade featured here just a few days ago, and it has now hit its target and played out beautifully.

In a rotational market, I like to look beyond relative strength. I’m also watching for bottoming signals in oversold stocks and sectors. Right now, AI names look like they should be setting up for a bounce, but if that doesn’t happen, we may get the volatile October after all.

Watch the key levels, respect the moving averages, and pay attention to earnings this week. Let’s see which sectors can keep building on Friday’s strength and whether the AI trade can find its footing.

One week ago, in my piece “Rotation,” I wrote:

“I know that some of the charts I have been mentioning all week, like IWM, RSP, XLF, KRE, XLU, and DIA, look like they are trying to put in bottoms, and Thursday’s candles are even more proof of that.”

One week later, that thesis looks like it is starting to play out. XLU was a solid one-day trade up to the gap fill, and XLF looks like it wants to put in a bottom just in time for bank earnings next week.

Bank earnings kick off earnings season, with JPM, GS, WFC, and C reporting Tuesday, followed by MS, BAC, PNC, BK, and SCHW later in the week. Assuming earnings don’t disappoint, WFC and JPM look like two of the better technical setups right now.

WFC dropped right into the gap fill from its June gap, filled it with some long lower wicks, and is now bouncing off the 100-week SMA. The risk/reward on this setup is solid. The one wrinkle, of course, is earnings right around the corner.

WFC Daily Chart

A gap down across the banks isn’t my base case, especially with analysts expecting third-quarter earnings growth at some of the major banks, driven in part by investment banking and trading activity. The higher interest rate environment could also help net interest income. However, higher rates can slow lending, and bond portfolios continue to face pressure. The charts are setting up for a bullish reaction, but how the market responds to earnings is still a coin flip.

Key Levels To Watch

XLF is bouncing right at the 200-day SMA. If it loses that level, the 100-week SMA is the next area I’m watching for support, especially after the waterfall selloff we saw in August.

XLF Daily Chart

I’m long XLF and will look to add if it drops to the 100-week SMA. That level is my line in the sand. Any close below it, and I think we’re likely heading toward the gap fills below. If that happens, hedging and risk management will need to kick in.

IWM also gave us another Thursday candle worth paying attention to.

Last Thursday, I highlighted the bullish candle off the 200-day SMA, with a buy zone extending all the way down to $271.69. Today’s candle wicked below last Thursday’s low and then closed back above the 200-day SMA. Even more interesting, it came on the highest volume of any candle in the past 100 days.

That’s a signal worth watching.

I think a quick trade up to Wednesday’s gap is a high-probability setup, and the larger pattern is starting to look like a double bottom. If buyers can follow through, IWM could be one of the names that benefits from a rotation away from tech.

IWM Daily Chart

What a Rotation Away From Tech Could Mean

If we do get a rotation out of tech, many of the names and non-tech sectors I’ve been discussing could finally get some relief. These areas sold off throughout September, and several are now showing signs of trying to put in bottoms.

Meanwhile, tech and the AI trade could see another round of selling. That would likely leave us in a market similar to June through September, where SPY moves sideways to lower while QQQ and SOXX show some weakness.

That doesn’t mean the tech trade is dead. Far from it.

It could simply mean we get another opportunity to own some of the best stocks in the market at Black Friday discount prices. A healthy pullback in the leaders, combined with improving breadth and money flowing into beaten-down sectors, could create some excellent setups for position traders.

For now, I’m watching the levels, respecting the risk around earnings, and looking for confirmation that this rotation has legs.

One can only hope things play out the way I’ve outlined above. If they do, there could be some great opportunities ahead.

QQQ Daily Chart

QQQ and the majority of the market gapped down on Wednesday morning after a solid little run into all-time highs.

QQQ and SPY had just broken out to new all-time highs, so a retest of that breakout and a continued grind higher is perfectly normal and, frankly, to be expected. If the short-term trend is going to continue, short-term bulls would want to see QQQ hold the prior all-time high during this weakness. SPY should also hold the $766 level.

Below those two levels, and we could see a bit more volatility coming around the corner.

QQQ Daily Chart

On days like Wednesday, I like to look for strong names that are showing great intraday relative strength. That can mean a stock that doesn’t gap down with the broader market, or one that gaps down and then quickly turns positive, also known as a red-to-green move.

While the whole market got bought up, at least for the most part, there were still some offshoots showing excellent relative strength.

Memory Stocks Push Higher

One of those areas was memory.

I’ve been saying for months now that buying SNDK off the 100-day SMA has been a winning strategy, and that once again proved to be the case on Wednesday. Just 10 shares purchased off the 100-day SMA would have yielded roughly $600-$800 on Wednesday alone.

That said, there is something I’m watching closely. Volume has been decreasing each time SNDK bounces off the 100-day SMA. Combine that declining volume with the overall price pattern, and there is a possibility that we are forming a rising wedge that eventually gives way to the downside.

If that happens, I would actually view it as a great buying opportunity.

SNDK Daily Chart

What I found particularly interesting was that the memory names didn’t really participate in the market’s push toward all-time highs on Tuesday. In fact, MU and several other memory names were down while the broader market was pushing higher.

Money rotated into memory names during Wednesday’s weakness, giving us bullish engulfing candles off support on both SNDK and MU, with MU being the stand out as far as strength into the close.

While Wednesday was the dip for the old saying “buy the dip,” I think that still applies to MU and SNDK as long as they remain above their 100-day SMAs.

MU is sitting in a tight wedge pattern and is nearing a point where it has to break one way or another. If it breaks down, we could get a nice wave lower toward the 200-day SMA. But if it breaks higher, I think a move into new all-time highs is very possible.

Either way, these are hot names with well-defined risk levels. Buyers have clearly been willing to step in, as we saw in Wednesday’s candle and in the earnings candle on MU.

That’s exactly the kind of relative strength I want to be paying attention to when the broader market gets choppy.

MU Daily Chart

Bitcoin: Retest Coming?

Bitcoin may be forming a small double top here, but it needs to break solidly below the $82,000 level for that setup to really come into play.

Even if the double top does trigger, the expected move would only take BTC down toward the $78,000 area. However, Wednesday’s weakness does signal that Bitcoin could be starting to see some consolidation.

Personally, I would love to see BTC chop lower into the $76,000-$71,000 range.

That is where the risk/reward starts getting quite attractive again. A move into that area would also create an interesting parallel to the beginning of the 2023 bull market and could set Bitcoin up for its next major move sometime in 2027.

There is another factor worth watching here: DXY.

The dollar index has been climbing higher day after day, and if you look at the historical relationship between DXY and Bitcoin, we know BTC generally does not like a bullish DXY environment.

Perhaps Bitcoin is able to shake that relationship this time around, but it’s still a signal worth respecting. If we start breaking some of the major bull-market support levels, I would pay very close attention.

DXY vs BTC Correlation

The Bull/Bear Line

I also have to mention the 120-SMA on the 3-day Bitcoin chart. If we start closing below that level, Bitcoin would be crossing back below the bull/bear line and into bear territory once again.

There was one instance in 2012 where Bitcoin crossed bullishly above the 120-SMA and then moved back below it without ever breaking the prior low made before the initial breakout. In other words the bear market was over with the first cross over, but it still retested below the key moving average for some time.

That would be my base case if we see a similar setup develop here.

If we look at the 2012 move, Bitcoin eventually retested the initial move off the low by almost 50%. In fact, it was a 48% retracement.

2012 Bitcoin Chart

If history were to repeat itself, a similar retracement from the current structure would take BTC down into roughly the $73,000 area.

Interestingly, that would line up almost perfectly with the daily long-term averages and the anchored VWAP from the major low, assuming the move happens in the relatively near future.

BTC Daily Chart

For now, the bullish trend remains firmly intact.

But Wednesday gave us a few things worth watching. QQQ and SPY need to hold their breakout levels. MU and SNDK are showing nice relative strength above their 100-day SMAs, with clearly defined hedge levels. Bitcoin is starting to show some weakness that could become very interesting if $82,000 gives way.

What I do find interesting is that the Q4 path I drew out on QQQ has been basically 100% accurate so far. I don’t expect that to last much longer, because forecasting further and further out gets more and more difficult. There are certainly issues that could lead to at least a short-term drawdown, which, again, should be buyable. If you want a full overview of my market thoughts and a breakdown of some of the most relevant tickers in the market today, check out the video above.

If we follow the historical pattern that has played out 6 out of 6 times we’ve entered a new rate hike regime in the past 30 years, SPY pulls back at least 7%. When that happens, the price action will start to look less bullish. We’ll see reversal candles, key levels breaking, and the few leaders that have been leading breaking down.

Right now we have bond yields pushing higher, poor breadth, the Fed tightening, the dollar rising, inflation staying sticky, the Iran war not slowing, and the election looming. I think a pullback is quite possible from here, but until we see signs in the chart that it’s starting, I can’t get too concerned.

QQQ Fourth Quarter Projection

QQQ gapped up into new all-time highs on Friday. SPY is still below its highs, but not by much. RSP, IWM, DIA, XLF, XLY, XLB, and XLU sold off over the past two months and now look like they’re trying to put in lows and move up, and we are seeing large buying volume come in at the lows. Those volume candles need to hold. If they don’t, breadth is only going to get worse. However, if they do hold and push higher, and we see everything start moving up together, we should get a nice bull market.

SPY Daily Chart

The Levels to Watch

The simplest way I can state it is this: as long as QQQ and SOXX stay above their 100-day SMA, I stay bullish on tech. The QQQ key level is $717 and the SOXX key level is $550, but I would let SOXX drop to $533 to give it some high-beta wiggle room. Closes below those levels would be an issue for the short-term bull thesis.

Right now NVDA, the largest company in the world, is pushing into new all-time highs. AAPL, the second largest, looks like it should stay relatively strong. GOOGL and AMZN continue to hold up even though they’ve been weak for the past several months. TSM looks great and keeps grinding higher. With that setup, I don’t see a high risk of a larger pullback right now. If that changes, the whole picture can change, but as long as the big tech names and the AI trade hold up, the market should keep going higher.

SOXX Daily Chart

What History Says About Q4

Historically, the 4th quarter of a midterm year has been one of the strongest periods of the 4-year cycle. That’s often because we see lows into September or October and then a strong rally that can carry through the rest of the year and into the 3rd year of the presidency. The super bullish stretch often doesn’t kick off until after the election, which usually makes the final two months of the year the time to be long and stay long.

The 3rd year of a presidential term also tends to be the strongest of the four, and by quite a bit. The S&P 500 has averaged 15 to 17 percent in year three, depending on how you measure and which source you use. That’s well above the overall average, which sits in the 10 to 12 percent range.

Historical precedent is not a guarantee. Trump’s first-term midterm year in 2018 stands in sharp contrast to the bullish Q4 data. In 2018, the market rolled over at the start of October and dropped all the way to Christmas Eve, with SPY falling just over 20% from its all-time high. During that period we also had a hiking Fed, rising bond yields, and growing growth fears. Buying into that 2018 drop was one of the best buying opportunities of the last decade. This adds to my conviction that if we do get a 7+ percent drop in SPY and a 10+ percent drop in QQQ, it would make for a great buying opportunity.

SPY 2018 Daily Chart

Right now, QQQ is pushing into new all-time highs, and that’s generally a bullish signal, not a bearish one. We get an ATH trap here and there, but overall you want to see markets make new highs with everything moving up together.

The Plan

Put that together with what I’m seeing in the charts, and if we do get a Q4 drop, here’s how I’m approaching it:

• A pullback of about 3%-4% on the QQQ into the 100-day SMA is buyable. That’s where I add bullish exposure.

• A close below the 100-day is where I stop buying and hedge. That’s the signal that price is lining up with the macro picture.

• A drop of 10% or more is where I buy heavy again. If we get there, I think it’s a great opportunity, like 2018.

Price right now says we don’t have to drop, but if we do, I have a plan.

QQQ Daily Chart

Price is King

There are plenty of headwinds: runaway bond yields, the Iran war, higher inflation, and a Fed in a rate-hike regime, all of which are related. It’s still quite possible this market pulls back. But one thing I never do is fight price. If price says higher, it doesn’t matter how many macro headwinds are out there, I have to follow price and assume higher. If we start breaking 100-day SMAs, then price will start to line up more with the macro picture.

This market has been driven by rotation since it topped out on June 4th. We saw XLF (Financials), XLB (Materials), XLI (Industrials), XLE (Energy), and IGV (Software) blast higher from June into August while AI tech names and the Mag 7 faltered and chopped lower.

Then sometime in August and September, we saw money start to rotate back into Big Tech, AI names, and out of everything else. It has been an excruciating seven weeks to be in small caps or really anything outside of Big Tech and the top AI players. RSP, the equal-weight S&P 500 ETF, has had six bear weeks in a row and is trying for another one depending on Friday’s close. MAGS, the Magnificent 7 ETF, on the other hand, is just off all-time highs after a great nine weeks in a row.

MAGS Daily Chart

Everyone is talking about the terrible breadth right now, which is something to notice for sure. However, the bigger story seems to be that this remains a rotation-driven market. Until we get all or most of the markets aligned in a bull trend, the choppy nature of things will probably continue.

The question is this: Are we about to get everything lining up and money flowing back into the market strongly instead of just rotating around inside of the market, or are we going to see another rotation out of tech and into everything else?

The Rotation Trade: Betting on a Bounce

No one knows the answer to this, and I don’t pretend to. However, I do know that some of the charts I have been mentioning all week, like IWM, RSP, XLF, KRE, XLU, and DIA, look like they are trying to put in bottoms, and Thursday’s candles are even more proof of that.

Like I said on Wednesday, whether this is a dead cat bounce or not remains to be seen, but I have decided to put a bit of risk on the trade to see how far this bounce takes us.

I messaged the entire RLT Community at 8:00am on Thursday, October 1st, with this message: “IWM is getting really close to its 200-day SMA, a level that it found support and bounced at in March.” I have included the chart I sent hyperlinked to that sentence.

It seems to me that should IWM find support here, it could easily grind higher up into the double-top neckline at $287.77. If it is a double top, it will reject there and fail. Considering that is about $12 higher than the 200-day SMA, there is decent risk/reward on this rotation play.

IWM Daily Chart

Just from the volume alone, it seems like buyers are ready to come into these beaten-down sectors at these levels. Look at the volume coming into XLU after a massive waterfall of a sell-off. At least a mean reversion trade here makes sense.

XLU Daily Chart

Tech and My Plan Going Forward

While it looks like money wants to flow into those names, it also continues to flow into tech. QQQ and XLK are likely to make a new ATH on Friday or perhaps early next week. The only question we have then is whether big sellers use that push to new highs as exit liquidity, or if this is the start of the next larger leg higher.

Either way, my plan remains the same. As long as QQQ and SOXX hold above the 100-day SMA, I will stay bullish on tech. If we break below that 100-day SMA, I will shift to a defensive posture.

I will also use this push higher as an opportunity to raise some cash, just in case we get that historical drop within the first 60 days of a new rate hike regime.

QQQ Daily Chart