Early Q3 Trend Reversal

Q3 has so far been the complete opposite of the trend in place in the first half of 2026.  Investors and traders have used the first handful of trading days of Q3 as a chance to sell the year’s big winners and rotate into the year’s losers.

The Nasdaq 100 ETF (QQQ) has been volatile over the last month with nothing to show for it.  Of the 20 trading days since 6/8, 16 have seen QQQ move up or down 1%+, yet its price is exactly flat over this period.

As shown below, QQQ is now at the bottom end of a flag pattern that forms from a series of lower highs and higher lows.  Technicians usually look for big moves whenever these flag patterns break.

The Philly SOX semis ETF (SOXX) rallied 111% from April lows through June 22nd.  It has since fallen 16% and is now just barely hanging onto its 50-DMA; a level it hasn’t closed below since early April.

Micron (MU) was one of the biggest winners in the semis space in Q2, rallying 277% from the end of March through June 25th.  MU has lost nearly a quarter of its value in a little over a week since that 6/25 peak:

Below is a snapshot of the biggest semis in the US run through our Trend Analyzer tool.  After trading in overbought or extreme overbought territory for much of Q2, they’re all back in neutral (or oversold) territory now.

Companies related to the data-center buildout have also been crushed over the last week as investors rotate away from AI infrastructure.

In addition to the semis and data-center stocks getting crushed, space-related stocks have also been experiencing gravity.  These names skyrocketed in May and June, but they’ve given up nearly all of those gains in a matter of weeks since SpaceX (SPCX) became available to equity-market investors.

As AI infrastructure and other first-half high fliers get sold, we’ve seen rotation into areas of the market that had been struggling.  Below are software and digital travel stocks that got slammed at various points in Q1 and Q2.  Most are up 5%+ over the last week.

Publicly-traded private equity stocks were down 20%+ across the board in the first half, but they’ve also seen a big bounce out of oversold territory since the start of the third quarter.  The PE stocks often move in tandem with software because of their huge exposure to the space.  If you think software will continue to rally over the coming months, you should probably be bullish on the alternative asset managers as well.

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