Nasdaq-100 representative notched straight six days of red before bouncing back on Friday. Is this pointing to something going forwards?
Markets have taken a step back over the last week as growth focused areas retreated off of all-time highs. We will open this piece with a reminder that markets cannot go up every day… nor should we expect them to. In fact, pullbacks off of all-time highs are more often than not constructive as markets cool off. Just how brave climbers scaling Mt. Everest have to retreat back to base camps to safely make it to the summit, major markets can move lower and “set up camp” before acclimating and trudging on to new heights. All this to say, regular declines are just that… and are usually nothing to worry about.
To provide more context here, we can look at Nasdaq-100 representative QQQ. Before accelerating higher on 8/22 on the back of dovish commentary from Fed Chair Powell, the fund had put in six straight daily declines. This marked the longest streak since October of 2022. Even with that negative accolade notched, the overall technical picture remains constructive. In fact, despite declining for six straight days, QQQ didn’t even reverse back down into O’s on its default chart. The fund still maintains a strong 5.59 fund score… and the only real “negative” present is the fact that recent action has left it quite extended on its default chart. Despite this, logical pullbacks could come around $550 (the middle of the trading band and just above old resistance from February). Other indicators around the platform still signal a fully risk-on tilt.
Going back to the idea that pullbacks (or even streaks of declines) are more “normal” than you might think, QQQ has seen six days or more of straight declines 34 times since 1993 (including 2025). Historically, returns over the decline (no matter how long) average -4.99%, nearly double the decline than we saw during this week’s exhale. On average, returns bounce back over the next week (as they seem to have done with action on 8/22) and are largely on par with historical averages over wider time frames (+8.11% over the next six months). Furthermore, QQQ has been positive a resounding 29 times, equating to a roughly 88% hit rate over the next six months. Excluding two main detractors (.com bubble and GFC) from the data set, the average six-month return jumps to 11.37%. It can certainly be easy to get wrapped up in the nightly news headlines about prolonged market declines when they occur. More often than not, it isn’t a sign of massive exhales to come.
