QQQ Reversal Has Been Inconsistent

We've been asked a few times about a potential reversal pattern in stocks, particularly the tech-heavy Nasdaq.

Stocks have alternated 1% days, which we took a look at in a Note yesterday. There was a mild negative bias over the next month or so, but it wasn't consistent in recent history.

Looking at the Nasdaq 100, particularly the QQQ fund, it jumped to a 3-month high two days ago and has since sold off at least .75% from the open to close each of the past two sessions.

From the fund's inception in 1999, this has happened 24 times. The table below shows how it performed going forward. There was some mild weakness over the next week, then mostly random returns. It was higher 75% of the time by 13 days later but the sweet spot was around 30 days later when it was higher approximately 80% of the time and with good average returns.

Some reversal patterns have been consistent predictors of future performance, but the price action in recent days is mixed. It has a mild negative tendency but nothing we'd consider to be a factor. We've looked at it a number of different ways, all with the same or mixed results.