Nasdaq 100 is up 55% in a year, yet 30% up from here is ‘Normal’

The Invesco QQQ Trust Series (QQQ), which tracks the Nasdaq 100 index, is up 54.6% over the last year. Some investors are becoming euphoric, while others are saying it can’t keep going up and a big drop is due.

Here’s how the current rally compares to prior rallies in history, and what it indicates could be forthcoming for QQQ and the Nasdaq 100.

First some context. 10% pullbacks following a big rally are quite common, 15% less so, but still quite common. 20% or larger drops are what investors generally fear, so we’ll look at history in terms of rallies that are followed by a 20% or greater decline.

Here are the recent rallies and the 20% or greater declines since 2008.

• Off the 2008 low the QQQ rallied 388% and then declined 26% in 2015.
• Off the 2015 low the QQQ rallied 128% and fell 23% in late 2018.
• Off the 2018 low, the price rallied 67% and then fell 30% during the COVID-19 pandemic of 2020.
• From the 2020 low, QQQ rallied 150% into the
• late 2021 peak. The price then fell 34%, rallied 24%, and then fell another 24% for an overall decline off the 2021 peak of 37%
• Since the 2022 low, the QQQ has rallied as much as 78%.

Cory Mitchell, an analyst with Trading.biz said, “Even over the last 16 years, the rally QQQ is witnessing is not uncommon. Following a low point the average rally is 183% and the median is 139% since 2008, not including the currently unfolding rally.

“In that context, the current rally of 78% could extend to between 140% and 180% before a 20% pullback and that would be quite “typical.”

In late 2023 the QQQ also made a new all-time high, surpassing the high from late 2021. Surpassing a prior major high is generally a bullish event.

When QQQ rallied above the 2007 high in 2010 it rallied 121% before a 20% pullback.

QQQ rallied 69% after eclipsing the 2015 high, and 28% after moving above the 2018 high.

After moving above the pre-COVID high, the price rallied 68% before a 20% pullback.

Currently, QQQ is only about 11% above the 2021 high.

If the rally were to stall now, it would be the briefest rally above a prior high since 2008.

Based on this data, a target of $560 to $575 is reasonable on QQQ before a 20% pullback. That’s about 30% above the current price.

This study looks at a relatively brief portion of history to assess how the QQQ has acted. How it has acted in the past may not be indicative of how it will act in the future. Control risk and position size accordingly.