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.