QQQ weekly: 11 - 15 May 2026
Rally pauses
Price action
After a steepling six-week run, QQQ at last paused and posted a small down week, -0.3%. Perhaps we are finally seeing the start of a digestion phase after QQQ’s +30% run in 32 trading sessions? QQQ remains in overbought territory, but the indicators are rolling over, which is consistent with a consolidation phase. The dotted lines on the chart below show instances where QQQ simultaneously extended more than 10 ATRs above its 100dma, and more than 6.5ATRs above its 50dma. QQQ has tended to consolidate or pull back after those conditions were reached.
The Fed
It will likely be Kevin Warsh’s first day as Fed Chair on Monday. President Trump will be hoping for a rate cut to help Republicans’ mid-term chances. If Warsh really does care about Fed independence, then Trump will be disappointed. After a decent jobs report on 8 May, this week brought hot CPI and PPI numbers. Core CPI yy came in at 2.8% and rising, with Core PPI at 5.2% and rising. As a result of those releases, and the reactions of FOMC members in response to them, and the ongoing closure of the Strait of Hormuz, the market is starting to price in hikes this year (h/t Jim Bianco)
Markets & Narratives
1/ Bond yields
As we noted in our last post, bond yields look like they are breaking higher as a result of rising inflation caused by tariffs and the energy shock, plus the AI capex surge. This week the US10y hit 4.6% and the US30y hit 5.1%. Higher yields have the potential to present a headwind for QQQ. The US30y yield is now at a similar level, 5%, that coincided with Trump’s decision to walk back hardline tariff policy in April 2025. Will this level prompt Trump to seek an off-ramp in the Iran conflict?
US interest rates have historically experienced upward pressure when new Fed Chairs begin their tenure. Will Chair Warsh face something similar?
2/ AI
The momentum factor, dominated by semis and AI-related stocks, has been on a tear. It looks stretched.
GIR offer this commentary on momentum streaks of more than 20% in a 3-month window. This analysis suggests consolidation should be the base case.
Breadth
Breadth has turned outright bad. The Market Monitor showed more stocks down by -4% than up by +4% on four out of five days, including a large 502 stocks down -4% on Friday. The McClellan Summation Index and the % of stocks above their 40dma are both falling. This is not constructive for QQQ.
Advance-Decline lines for the SP500 are not confirming new highs in that index.
Sentiment & Positioning
This week’s surveys continue to point to bullish, but not euphoric sentiment. The NAAIM rather surprisingly fell back to 74, while the AAII survey remains unchallenging, and the GS US Sentiment Indicator stepped down to 0.8.
However, we can discern signs of froth in the options market, with the Put/Call Ratio 5dma down to 0.63, driven by very large call option volume.
Seasonality
The Nasdaq 100’s 1-year cycle becomes more constructive in the last week of May. However, NDR’s Nasdaq Cycle Composite for 2026 is less constructive. This is a composite seasonality study that incorporates the 1-year seasonal cycle, plus the 4-year Presidential Cycle, and the 10-year Decennial Cycle. It suggests we are entering a seasonally challenging phase until about one month before the mid-term elections. H/t Seth Golden.
Summary
Price action: QQQ paused after a six-week lock-out rally. QQQ remains overbought. The longer-term primary trend is bullish.
The Fed: the market-implied probability of a hike in 2026 is rising as a result of rising inflation, the energy shock, and hawkish pronouncements from FOMC speakers. Kevin Warsh looks set to take over as Fed Chair next week. Fed Chair transitions have historically been accompanied by rising bond yields.
Markets & Narratives: 1/ rising bond yields may present a headwind to QQQ. 2/ the momentum factor, dominated by AI-related names, is stretched.
Breadth: poor, deteriorating.
Sentiment & Positioning: positioning indicators are not stretched, but options markets show signs of frothiness.
Seasonality: the Nasdaq 100 1-year seasonal cycle shows strength at the end of May, but seasonality composites that include the US Presidential Cycle suggest mid-term weakness in Q2 and Q3.
Key events next week: Iran news
View
Short-term: momentum slowing, pullback starting?
Red-hot short-term momentum faded this week amid rising bond yields. Overbought conditions, overextension of the momentum factor, rising bond yields, deteriorating breadth, and froth in the options market suggests conditions may be setting up for a period of consolidation.
Long-term: cautious bullish
From a technical perspective, QQQ has done what it needed to do to reclaim its long-term primary bullish trend - it has reclaimed its long-term bullish channel and its long-term moving averages.
From a fundamental perspective, the picture is more constructive than a few weeks ago. The negative narrative headwinds of Iran, private credit, and AI disruption are fading, while the positive tailwinds of earnings, AI capex and AI productivity are back. However, the oil price shock is not over yet, mid-term seasonality is not helpful till the back-end of the year, plus there is a risk of Fed dysfunction when Warsh takes over as Chair.
Challenges and risks
Iran conflict and energy shock
Rising bond yields
Weak mid-term seasonality
Fed dysfunction under new Chair Warsh
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Alex