Nasdaq's recovery attempt

Key points

• After officially entering correction territory, the Nasdaq 100 has staged a rapid recovery, with short-term market breadth surging from extremely washed-out levels.
• Historically, when the percentage of QQQ components trading above their 10-day moving average rockets from under 10% to over 70% in just five days, the index boasts an 80% win rate over a one-year timeframe.

Nasdaq's recovery attempt

Recent market action has been heavily dominated by geopolitics, leaving investors on edge as they parse daily headlines to determine whether we will see a pause in war or further escalation.

The SentimenTrader team emphasizes two indispensable market analysis concepts in our research reports, among many others: the strategic use of composite models and the identification of reversal signals.

The significance of a composite indicator lies in its ability to minimize the risk of failure, a common drawback when relying on a single metric. Furthermore, the application of reversal signals enhances the risk-reward ratio of trading setups, helping traders avoid the peril of trying to "catch a falling knife."

A previous report noted that the Nasdaq 100 had officially fallen into correction territory, and that initial 10% drawdowns from multi-year highs t