$QQQ and $SPY Navigating Market Volatility: Is This a Bear Market or Just a Correction?

As you can see in the screenshots below, the Nasdaq 100 ETF ($QQQ) sold off by more than 10%, and the S&P 500 ETF ($SPY) sold off by more than 5%. Is this the start of a bear market or just a correction?

First, let's discuss how this all began on July 11th. What triggered this sell-off? On July 11th, economic data was released, including a negative CPI report. This may have led smart money to decide it was the top, anticipating rate cuts that the Fed was late to implement. This caused a significant sell-off on July 11th, followed by a brief pullback and another sell-off, as observed in the screenshots.

Then, on July 24th, another significant economic event occurred: the PMI came in under 50, which is a major warning sign.

We all know that when the Fed keeps rates high for longer than needed, a recession often follows. Even if they start to lower rates, it may not help immediately. You can check all these charts here

The next big hit was due to the Initial Jobless Claims, which came in near 250k, and the ISM PMI dropped as low as 46 on August 1st (which under 50 is a warning sign), followed by a sharp drop in Nonfarm Payrolls on August 2nd.

At the same time as the July 11th sell-off in SPY and QQQ, small caps like IWM and the equal-weighted S&P 500 RSP were rising with huge volume. This indicates that the market expects a rate cut soon, as it often prices in ahead of the action. Hence, buy on rumors and sell on news. Usually, when the first rate cut happens, the market drops. This time, even before the rate cut, there was almost certainty that the first cut would happen in September, leading to a market sell-off.

Now, what is next? Is it a bear market or a deep correction? For it to be considered a correction, the index should fall 10%, but SPY hasn't made a 10% pullback, and the RSI for SPY is also not in oversold territory. So, I expect SPY to fall further (probably after some consolidation) down to 503 to close the gap and then bounce. That bounce could either go up and make a new all-time high or, after a brief rally, fall and make a new lower low, indicating the onset of a bear market. I think the latter scenario is more probable, especially considering the high likelihood of a US recession. Therefore, a bounce followed by a further decline seems highly probable.

Anyway, we can always trade based on levels without hesitation, using stops to manage risk-reward ratios.

Comments

🌾 Why Billionaires Are Buying Farmland — The Real Reasons Behind the Land Rush

🏞 Why Billionaires Are Quietly Buying Farmland and Vast Tracts of Land In recent years, some of the world’s richest people — including Bill Gates , Jeff Bezos , and Mark Zuckerberg — have quietly become major landowners. From farmland in the U.S. Midwest to tropical ranches in Hawaii, they are accumulating land faster than ever. But what’s driving this modern-day land rush? 🌾 1. A Hedge Against Inflation Farmland is one of the oldest and safest tangible assets . It generates real income through crops and leases while preserving value when inflation rises. As food prices climb, farmland values follow — making it a powerful inflation hedge for billionaires whose wealth is tied up in volatile tech stocks. 🌍 2. Control Over Food and Resources Land means control of food production, water rights, and renewable energy potential . Bill Gates’s 270,000-acre farmland portfolio — the largest in America — reflects a push toward sustainable food systems and climate-friendly agr...

Aerospace & Defense Stocks Breakdown: Which Companies Are Worth Investing In?

If you are looking for US Aerospace & Defense Stocks to invest in then let’s compare Lockheed Martin (LMT), RTX Corporation (RTX), General Dynamics (GD), General Electric (GE), and Boeing (BA) from an investment perspective, focusing on: Core business & products Defense exposure Stability & financial health Growth prospects Valuation and dividends 🔹 1. Lockheed Martin ( LMT ) Core Business : Pure-play defense contractor — fighter jets (F-35), missiles, helicopters (Sikorsky), space systems. Defense Exposure : ~96% of revenue comes from the U.S. Department of Defense and allied governments. Stability : Very stable, heavily backed by multi-year government contracts. Growth : Moderate growth; mostly in line with defense budgets. Dividend : Strong dividend (~2.7%), with decades of increases. Valuation : Often seen as fairly valued or slightly undervalued in uncertain times. Risks : Dependent on U.S. defense budget; limited commercial exposure. ✅ Best for cons...

Invert, Always Invert: Charlie Munger’s Secret Weapon

One of Charlie Munger’s favorite tricks for solving problems wasn’t something flashy or complicated. It was simple, almost childlike. He called it: “Invert, always invert.” But the story behind it goes back much further than Omaha boardrooms or Berkshire Hathaway meetings. From a Mathematician to an Investor In the 19th century, German mathematician Carl Gustav Jacob Jacobi often faced impossible problems. Instead of trying to wrestle them head-on, he flipped them around. If proving something directly was too hard, he asked himself: “What would make the opposite true?” Munger stumbled across this idea and immediately saw how powerful it was. If it worked in mathematics, why not in business, investing, or even life? He often quipped: “All I want to know is where I’m going to die, so I’ll never go there.” It sounds funny, but behind the humor is the essence of inversion: if you want to succeed, start by avoiding failure. A Dinner Conversation Imagine you’re at dinner with Charlie Mung...

📈 SigmaTrader Blog

Search This Blog