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Ignore the Headlines: Instead, Pay Attention to This
Key Takeaways
The market is currently in a historically tight range.
Leading stocks & indices are testing their 200-day moving averages.
Despite bearish headlines, the price action suggests weak investors are being shaken out.
“If they don’t scare you out, they will wear you out.” ~ Peter Lynch
When I analyze the recent market action, I am reminded of the Peter Lynch quote above. Over the past five months, the market has been tricky, headline-driven, and contradictory. For instance, according to Bloomberg, “This is the tightest range for this point of the year in the history of the S&P 500 (going back to 1928), and tighter than any Dow range going back to 1896.”
Image Source: Bloomberg
Conversely, performance in individual names has been anything but predictable. For example, the divergence among AI names is breathtaking. Year-to-date, Applied Optoelectronics ((AAOI - Free Report) ) is up 179% while IREN ((IREN - Free Report) ) is flat.
Image Source: Zacks Investment Research
Which Way Will the Market Break?
On Wall Street, volatility contraction leads to range expansion. The longer and tighter the price consolidation, the larger the subsequent market move after a breakout or breakdown. So which way will the market break?
“Far more money has been lost by investors trying to anticipate corrections than has been lost in all the corrections themselves.” ~ Peter Lynch
Amid a war with Iran and fears of further geopolitical escalation, investors are fearful. According to the latest AAII Sentiment Survey, the majority of investors lean bearish.
Image Source: Zacks Investment Research
What do the Technicals Say?
In a market full of headlines, savvy investors cut through the noise using technical analysis. After all, price and volume action can provide more value to investors than any headline can. Below are three technical details to consider:
1. QQQ 200-day Moving Average Support: The Nasdaq 100 Index ETF ((QQQ - Free Report) ) just tagged its 200-day moving average for the first time since breaking above it in mid-2025. Typically, the first two tags of the 200-day moving average act as fantastic risk/reward levels for longs.
Image Source: TradingView
2. Undercut & Reversal: Monday, QQQ undercut the price consolidation dating back to early last month, then reversed higher and finished the session green. This type of “stop run” is often a necessary ingredient to shake out weak market participants.
Image Source: TradingView
3. Leading Stocks Find Support: As the old Wall Street adage goes, “So go the leaders, so goes the market.” In a welcome sign for bulls, several leading AI stocks found support at the 200-day moving average this week, including NVIDIA ((NVDA - Free Report) ), Broadcom ((AVGO - Free Report) ),Nebius ((NBIS - Free Report) ), and Iren ((IREN - Free Report) ).
Image Source: Zacks Investment Research
Interpret, Don’t Predict
“My metric for everything I look at is the 200-day moving average of closing prices.” ~ Paul Tudor Jones
When it comes to markets, the best thing an investor can do is observe and respect price action and maintain an open mind. Despite the negative headlines and choppy price action lately, leading stocks and indices are finding buyers at the 200-day moving average. As such, investors should lean long stocks. Should the 200-day moving average break, investors can change course. However, the 200-day moving average currently offers asymmetric reward-to-risk.
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Image: Bigstock
Ignore the Headlines: Instead, Pay Attention to This
Key Takeaways
“If they don’t scare you out, they will wear you out.” ~ Peter Lynch
When I analyze the recent market action, I am reminded of the Peter Lynch quote above. Over the past five months, the market has been tricky, headline-driven, and contradictory. For instance, according to Bloomberg, “This is the tightest range for this point of the year in the history of the S&P 500 (going back to 1928), and tighter than any Dow range going back to 1896.”
Image Source: Bloomberg
Conversely, performance in individual names has been anything but predictable. For example, the divergence among AI names is breathtaking. Year-to-date, Applied Optoelectronics ((AAOI - Free Report) ) is up 179% while IREN ((IREN - Free Report) ) is flat.
Image Source: Zacks Investment Research
Which Way Will the Market Break?
On Wall Street, volatility contraction leads to range expansion. The longer and tighter the price consolidation, the larger the subsequent market move after a breakout or breakdown. So which way will the market break?
“Far more money has been lost by investors trying to anticipate corrections than has been lost in all the corrections themselves.” ~ Peter Lynch
Amid a war with Iran and fears of further geopolitical escalation, investors are fearful. According to the latest AAII Sentiment Survey, the majority of investors lean bearish.
Image Source: Zacks Investment Research
What do the Technicals Say?
In a market full of headlines, savvy investors cut through the noise using technical analysis. After all, price and volume action can provide more value to investors than any headline can. Below are three technical details to consider:
1. QQQ 200-day Moving Average Support: The Nasdaq 100 Index ETF ((QQQ - Free Report) ) just tagged its 200-day moving average for the first time since breaking above it in mid-2025. Typically, the first two tags of the 200-day moving average act as fantastic risk/reward levels for longs.
Image Source: TradingView
2. Undercut & Reversal: Monday, QQQ undercut the price consolidation dating back to early last month, then reversed higher and finished the session green. This type of “stop run” is often a necessary ingredient to shake out weak market participants.
Image Source: TradingView
3. Leading Stocks Find Support: As the old Wall Street adage goes, “So go the leaders, so goes the market.” In a welcome sign for bulls, several leading AI stocks found support at the 200-day moving average this week, including NVIDIA ((NVDA - Free Report) ), Broadcom ((AVGO - Free Report) ), Nebius ((NBIS - Free Report) ), and Iren ((IREN - Free Report) ).
Image Source: Zacks Investment Research
Interpret, Don’t Predict
“My metric for everything I look at is the 200-day moving average of closing prices.” ~ Paul Tudor Jones
When it comes to markets, the best thing an investor can do is observe and respect price action and maintain an open mind. Despite the negative headlines and choppy price action lately, leading stocks and indices are finding buyers at the 200-day moving average. As such, investors should lean long stocks. Should the 200-day moving average break, investors can change course. However, the 200-day moving average currently offers asymmetric reward-to-risk.