Entering text into the input field will update the search result below

The QQQ Is Formally In A Correction (Technically Speaking For 3/8)

Mar. 08, 2021 8:04 PM ETQQQ, IWM, SPY14 Comments
Hale Stewart profile picture
Hale Stewart


  • Inflation is still a non-issue.
  • However, supply chain disruptions may lead to temporary price increases.
  • The QQQ is officially in a correction.

Let's take a look at the indexes' YTD performances:As I've been noting for the last few weeks, the key to this table is the drop in treasury prices. The long end of the bond market is down over 10%, which means it is formally in a bear market. The belly of the curve is off modestly. Micro-caps are still the clear winner for the year; they're up a solid 20%. Small-caps gains are slightly more than half that; mid-caps have also made impressive gains. Large-caps are up marginally.Let's start at the bottom by noting that staples and utilities - two defensive sectors - are down for the year. Tech and consumer discretionary are also off; this explains why the SPY and QQQ are barely higher on the year. Financials and industrials - which are two key sectors of the IWM and IWC, are up.

There's not much market-moving data this week. The key releases are CPI and PPI. Let's start with CPI:Total CPI (left) is below 1.5% while core CPI (right) turned lower in the last report.

As for PPI, let's start with this graph:Starting in the mid-1980s CPI (in red) was very consistent while PPI (in blue) was much more volatile. But the volatility in PPI didn't flow into CPI. That means that companies learned how to absorb price increases without passing them onto customers.

The current economic environment is going to test that development. The latest ISM manufacturing reports have contained anecdotal comments specifically mentioning price pressures. The Markit Economics release confirms this (emphasis added):

Also helping to buoy the headline PMI figure was a substantial lengthening of supplier delivery times amid significant supply chain disruption. Ordinarily a signal of improving operating conditions, longer lead times for inputs reportedly stemmed from supplier shortages and transportation delays due to coronavirus disease

This article was written by

Hale Stewart profile picture
Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM in domestic and international taxation (MagnaCumLaude). He is the author of the book The Lifetime Income Security Solution. Follow me on Twitter at @originalbonddadYou can read his legal analysis on his law office's blog.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (14)

Nice charts. Thx! Interesting points.
Was in a correction. Classic bear market snap back rally, up over 4% or 1/3 the noted drop on the chart above. Classic? Apple has a really nice heads and shoulders topping pattern. Perma Bulls will be buying with both hands while smart money is lightning up on zero profit growth. Who wins, shall see?
“Technology and communication services took the brunt of the selling pressure, as traders continue to take profits in these sectors.”

Zero profit mega growth stocks, arkk tells ya that. 109/159 = .3125 loss. Mega bear. Bear contagion?
Diesel profile picture
<<< Classic bear market snap back rally, up over 4% or 1/3 the noted drop on the chart above. Classic? >>>

That's absolutely not what the charts are saying. Quite the opposite actually. It was a classic bull market pullback which found a strong bottom and bounced back.
@Diesel More proof that charts don't say anything other than what the viewer wants them to say
Diesel profile picture
I actually WANT charts to say we are headed down so that I can buy more shares at cheaper prices but that's not what they are saying. I wish Nasdaq would drop another 20% so I could deploy more cash, I really do, but it won't.
Good data and commentary, thanks.
Hale: “The long end of the bond market is down over 10%, which means it is formally in a bear market.” I thought the arbitrary thresholds are correction at 10% and bear at 20%? 

Bigger picture, I’m curious how long the primary indices can remain decoupled and which wins? 

Thanks and kind regards.
Diesel profile picture
QQQ most likely either bottomed or very close to bottoming.
Diesel profile picture
Looks like I was correct after all.
@Diesel I say there is a fundamental revaluation underway. Rates are rising strongly from that strength it’s not reversing imho.
@Diesel I’d wait until you regain 50-66% of the 12% drop, right now it could be a classic retracement during a possible bear market rally.
good overview
In "flux" eh? Could go up or down or stay the same. Charts told you all that?
Thank you Hale.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.