Nasdaq Warning Signs: QQQ Relative Weakness Builds Beneath the Surface

 

Above is a daily chart of QQQ, with a ratio chart of QQQ versus SPY in the lower pane, and together they are beginning to tell a subtle but important story. On the surface, QQQ appears relatively calm. Price has been consolidating, moving sideways and giving the impression of stability. However, when you look beneath the surface through the lens of relative strength, a different picture starts to emerge.

The QQQ/SPY ratio line has been showing early signs of weakness during this consolidation. About two weeks ago, the ratio broke its uptrend line and, notably, it has not been able to reclaim that level since. That failure matters. Relative strength trends often turn before price does, and prolonged inability to regain a broken uptrend can be an early warning that leadership is eroding. This makes the current consolidation in QQQ less comforting than it might initially appear.

What adds to this concern is the broader market context. While QQQ is chopping sideways and its relative strength is fading, IWM is pushing to new all-time highs. Small caps making fresh highs while the Nasdaq lags is a classic sign of rotation and potential weakness in former leaders. This divergence doesn’t guarantee immediate downside, but it does suggest that capital is flowing away from large-cap growth and into other areas of the market.

Looking at the internals of the Nasdaq reinforces this view. Many of the index’s most influential names are no longer acting like leaders. Stocks such as NVDA, AMZN, NFLX, AMD, MSFT, and META are not making new highs. In fact, several are beginning to roll over or break minor support levels. When heavyweight components start to lag together, it often precedes broader index-level weakness.

That said, spotting relative weakness does not automatically mean it’s time to short. Relative weakness is a condition, not a trigger. I prefer to let price confirm the thesis. That means waiting for clear support to break or for a pivot low to be taken out before getting involved. Right now, QQQ has not provided that confirmation, so there is no actionable entry.

A good example of this approach was NFLX. The stock showed relative weakness first, but I only acted once support was decisively broken. Until the market proves the case again, the game plan is simple: stay patient, remain objective, and continue to monitor price action closely. For now, I’m sitting tight and alert to the growing signs of weakness in the Nasdaq, but waiting for the market to make the next move.

You can read about my NFLX post from 10 days ago here:  NFLX: Relative Weakness You can't Ignore

Why MSOX Can’t Keep Up: The Hidden Decay Behind Leveraged Cannabis ETFs

 If you’ve ever compared a long-term chart of MSOS versus MSOX, you’ve probably noticed something strange, even when cannabis stocks rally hard like today, with MSOS touching its August 28th high MSOX still sits far below its old levels. The difference has nothing to do with the underlying cannabis stocks themselves. It’s baked into how leveraged ETFs work.

MSOX is a 2x leveraged ETF, meaning it aims to deliver twice the daily performance of MSOS. The keyword here is daily. It doesn’t track 2x the long-term performance it tracks 2x of the day-to-day moves. This distinction is what causes the decay over time.

Leveraged ETFs experience something called volatility decay or compounding drag. When the underlying index (in this case MSOS) chops around, even if it ends flat over a long period, the leveraged ETF often ends up lower. That’s because each percentage move occurs on a constantly changing base. For example, a 10% drop requires an 11.1% gain to recover. When you magnify those moves with leverage, the “climb back” becomes even harder.

In high-volatility sectors like cannabis, this effect is amplified. MSOX gets hit harder on down days, and on up days it has to work overtime just to catch back up. When the price action zig-zags which cannabis stocks are notorious for, MSOX bleeds value even while MSOS eventually stabilizes or recovers.

This is why today’s charts look so different. MSOS has rallied all the way back to its late August levels, but MSOX is nowhere close. The leveraged decay accumulated over weeks of volatility, making MSOX structurally unable to track the same long-term recovery.

The takeaway is simple: MSOS is built for holding. MSOX is built for short-term trading. Over time, the math always wins and leveraged ETFs almost always lose value relative to the underlying.

MSOS Surges After-Hours as the 50-Day Cycle Continues to Deliver

 

Above is a 15-minute chart of MSOS, and it clearly shows an explosive after-hours move sparked by a well-timed evening news catalyst. What makes this especially interesting is how it aligns with the 50-day cycle I highlighted last week, a cycle that bottomed two weeks ago and has been playing out with impressive accuracy ever since.

Cycles can be tricky, but when you find one that repeatedly marks meaningful turning points, it becomes something worth paying close attention to. In this case, the 50-day cycle suggested that MSOS was due for a reversal, and so far the price action has confirmed that idea almost perfectly. From the cycle low, buyers have stepped in consistently, pushing the ETF higher and showing clear signs of accumulation beneath the surface.

Today’s after-hours surge only strengthens the case. A catalyst hitting at the right moment often accelerates a move that was already building, and that appears to be exactly what’s happening here. If the cycle continues to unfold as expected, MSOS could rally into at least the end of the month.

What happens tomorrow (Friday) and how we close the week will be especially important. A strong finish would reinforce the cycle’s validity and set the stage for continued upside momentum. Either way, MSOS is giving us a fascinating real-time example of how timing cycles and catalysts can combine to create powerful moves. 

You can read my post from last week regarding the cycle right here.

How Relative Strength Revealed Today’s Big Move in GDX

 

Using Relative Strength to Track Money Flow: A Clear Example From Today’s Market Action

Today offered a textbook lesson in how relative strength can reveal where money is truly flowing, often before the broader market shows its hand. When you compare a strong stock or ETF to a benchmark like the SPY, you can spot early signs of accumulation, rotation, or weakness. GDX (the gold miners ETF) delivered a perfect real-time example of this on the 3-minute chart.

At the open, marked as Point A, both SPY and GDX rallied together. This is normal, broad markets lift most assets in the first moments of trading. But what happened afterward is where the edge appears. As the morning progressed, the momentum in SPY faded. By Point B, SPY pushed down to fresh intraday lows, giving the impression of a weak market and suggesting that risk-off pressure might continue.

But look closely at GDX during that exact moment. Instead of following SPY lower, GDX held firm and printed a significantly higher low compared to Point A. This is the essence of relative strength divergence: the market shows weakness, yet a specific asset refuses to break down. When this occurs, it’s often because buyers are quietly stepping in accumulating shares even as the broader market struggles.

This higher low was your first major clue that GDX was not just stable, it was under accumulation. Money was flowing into gold stocks while the overall market weakened. That kind of divergence is one of the most powerful tells a trader can use.

Shortly after forming that higher low, GDX pushed up through resistance. Once that level broke, the ETF continued to rally steadily into the early afternoon. Traders who recognized the divergence early had a clean setup and a strong trend to ride. Relative strength not only identified where buyers were focused, but also helped anticipate the direction of the next move.

The story becomes even more compelling when you zoom out. Looking at the daily chart, you’ll see that this intraday relative strength move wasn’t just noise, it actually triggered a breakout on the higher timeframe. That means the strength we saw on the 3-minute chart was part of a broader shift in demand for gold stocks.

This is exactly why relative strength is so valuable. It helps you see where money is flowing before the breakout becomes obvious to the crowd. Today’s action in GDX was a clean, powerful example of how watching divergences can guide you directly to the strongest opportunities in the market.

For more relative strength insights and recent market posts, visit the homepage at The Relative Strength Trader

Spotting Winners: CTSH Shows What True Relative Strength Looks Like

 

CTSH: A Clear Lesson in Relative Strength

When analyzing market behavior, few concepts are as valuable or as consistently reliable as relative strength. Above is a daily chart of CTSH, and it provides a textbook example of how powerful this concept can be. Unlike many technical indicators that change their signals depending on the timeframe you’re viewing, relative strength delivers the same message across the board. Whether you’re looking at a 60-minute chart or a daily chart, the stock is either outperforming the market or it isn’t. That uniformity builds confidence, and confidence is crucial when making trading decisions.

Why Relative Strength Matters More Than Indicators

Most technical indicators are derived from price, yet they often contradict themselves depending on the timeframe. A stock might look bullish on the hourly chart but overbought on the daily. Signals can conflict, cross, or cancel each other out. This inconsistency makes it difficult to trust what you're seeing. Relative strength, however, strips away the noise.

At its core, relative strength shows how a stock behaves compared to the broader market or a benchmark, such as the S&P 500 ETF (SPY). If the market is pulling back but your stock is not only holding firm but making higher lows, that is a tremendous clue that buyers are quietly stepping in. It’s one of the purest forms of price analysis, and CTSH is a perfect example of why it works.

CTSH vs. SPY: A Powerful Comparison

In the lower pane of the above chart is SPY, placed there for direct comparison. Notice what happens during the most recent pullback. SPY made a clear lower low, highlighted with the white trendline. The broader market was weakening. Sellers were in control. Yet CTSH did the exact opposite, it made a significantly higher low during the same period.

That type of divergence is not random. It is a strong sign of accumulation. Institutions often build positions quietly during market dips, supporting a stock even when the rest of the market is retreating. CTSH held firm, showing impressive resilience when it mattered most.

Early Breakout Signals the Strength Behind the Move

Once SPY finally began to turn higher, CTSH wasted no time. While the market was simply recovering, CTSH was already breaking out to a new swing high. That breakout would have been a fantastic entry opportunity for anyone watching relative strength. The fact that CTSH was outperforming before the market turned gave traders a leading indicator, not a lagging one.

And the follow-through confirms the validity of the signal. Since that breakout, CTSH has continued to climb aggressively, rewarding traders who recognized the early strength and acted accordingly..

A Simple but Effective Trading Lesson

The beauty of this setup is its simplicity. No complicated indicators, no confusing overlays, just pure observation and an understanding of how strong stocks behave during weak markets. CTSH showed relative strength when the market faltered, and once the market recovered, the stock launched higher.

It’s a powerful reminder that sometimes the best trades come from simply knowing what to look for.

For more relative strength insights and recent market posts, visit the homepage at The Relative Strength Trader