The QQQ gave us what should have been the perfect gap and go, but it only lasted about half the day. Sellers stepped back in, pushed it lower, and it closed just barely green with a big and ugly upper wick. SPY printed its third straight bear candle and closed right at the gap from last Monday.
QQQ Daily Chart
The weakness is obvious, but tech is holding things together, so neither the bulls nor the bears can take control. We’re stuck firmly in the chop zone.
Long-dated yields kept ripping on Wednesday. The 10-year, 20-year, and 30-year all made new highs. Either the bond market or the equity market is lying right now. If yields keep climbing, I can’t see how stocks hold up. But equities have been remarkably resilient so far. If yields get some relief and we see even a short-term top, I’d expect stocks to rally.
30 Year Bond Yields
Outside of Tech, It’s Getting Ugly
Outside of tech, the market is getting slaughtered.
RSP is down 42 days in a row and sits about 7% off its highs, close to its 200-day SMA. DIA is almost the same story: down 57 days and roughly 7% off, nearing its 200-day. IWM is down 47 days and almost 9% off its highs, also approaching its 200-day.
I expect these to at least try to bounce around the 200-days. Whether it turns into more than a dead cat bounce, we’ll see. If we don’t get some bullish price action there, that’s a reason for me to get a lot more cautious. When major indices start closing convincingly below the 200-day, pay attention.
IWM Daily Chart
My Market Thesis
Tech has been driving this market, so it’s simply the easier place to be right now. Honestly, that’s true most of the time. I always like assets that can produce asymmetric returns, which is why I focus so much on big tech, QQQ, and Bitcoin.
Macro matters, but if you get too buried in the data it becomes a distraction and often a quite confusing picture. This is why I always rely on the price action of QQQ and SPY above all news, macro or anything else. If they’re above key support, I keep a bullish lean. If they’re choppy like they are now, I cut exposure, take profits faster, and wait for better conditions. Right now QQQ is holding, and so is SPY. That’s the main thing I want to know when I analyze the market.
SPY Daily Chart
Price action is king. It doesn’t matter what the macro data says if price is telling us something different, and right now price is telling us there’s a lot of fear and uncertainty. Its also telling us that things also got overheated earlier this year, so the market needs time to cool off and consolidate, perhaps pull back some more.
The charts and the historical analogs also suggest we could see some weakness in October that turns into a solid buying opportunity. Whether it comes from bonds cracking, oil surging, inflation heating up, or something else entirely doesn’t matter much in the grand scheme. All I care about are the key levels on the stocks I want to own and the handful of ETFs that matter most to me: SPY, QQQ, XLK, and SOXX. That’s where my attention stays.
P.S. I know we were all waiting with bated breath for MU to report and finally make something happen in this sideways market. However, about two hours after the release, MU is about as totally flat. The whole AI trade looks coiled up and ready to move. For now at least, that coiling shall continue.
MU Daily Chart
