Midterm Mayhem
Weakness Is Historically Normal
Friday’s High-Wave Candle: A Critical Juncture for Markets
Friday’s candle cemented my risk management levels, giving us a near picture-perfect high-wave indecision candle sitting right on top of key market supports. It’s not hyperbole to say that what happens over the next several weeks — and likely months — will be heavily influenced by the next few days of price action.
A decisive break below the 100-day SMA on SPY, sub-$600 on QQQ, sub-$200 on RSP, or sub-$491 on DIA would likely ignite selling toward the next support layer.
SPY Daily Chart
Next Support Levels If Markets Break Down
SPY: The next immediate support sits near $653, aligning tightly with the 200-day SMA at $648. Once the 100-day fails, the 200-day often acts as the next magnet—especially absent strong horizontal support in between.
DIA: The next support is the 100-day SMA around $478. If the SPY-DIA divergence follows historical precedent, we should tag that level before any new all-time highs. This pattern has played out in the last seven similar instances—why break the streak? Below the 100-day SMA, the 200-week SMA and prior all-time highs in the $450s offer more robust support.
QQQ: The zone to watch is $581–$571. A loss of the 200-day SMA would put the prior all-time high (~$541) and 100-week SMA (~$523) in play. Frankly, a reset to those levels would be healthy: it would purge last year’s exuberance, bring tech into buyer-friendly territory, and lay groundwork for the next advance.
A close decisively below the 100-week SMA on QQQ would escalate concerns—but we’re still far from that. We don’t even know if it will be tested. That said, a break below Friday’s candle would certainly increase the odds.
DIA Daily Chart
Support Isn’t Guaranteed
Remember: support levels are zones to monitor, not ironclad floors. Confluence (horizontal levels, volume shelves, anchored VWAPs, moving averages) boosts the probability of buyers defending them—more eyes on the same spot means more potential bids.
But in fear-driven unwinds, price can knife through everything. Orders vanish. Sentiment flips. Leverage evaporates. Margin calls cascade. At that point, technical support bows to forced selling and human psychology. No asset escapes eventual resets of prices after large bull markets—not silver, not the Nasdaq, not NVDA, not even the Dow. Charts ultimately reflect human psychology and behavior.
I wouldn’t rule out QQQ retesting its prior all-time high at $540 or even the 100-week SMA sometime this year. After all, this is a midterm year.
QQQ Daily Chart
The Midterm History Lesson
Since 1970, midterm years have shown higher volatility: median standard deviation of S&P 500 returns around 16% (vs. ~13% in other years). Average intra-year drawdowns hit ~19% (vs. ~13% elsewhere), per analyses from Capital Group, Mackenzie Investments, and similar sources. We just have to look back at recent midterm years to see this trend in action. In 2022, SPY pulled back nearly 28%. In 2018, we got two steep corrections—one 11% to start the year and the other 20% to end the year. In 2014, SPY fared the best with only a 10% correction, and in 2010 it was back to standard midterm weakness with a 17% correction.
An average 19% SPY drawdown would likely imply 25%+ downside in QQQ—potentially filling the major breakaway gap from May 2025. However, we’re nowhere near that yet. Multiple supports must fail first, and it’s premature to fixate on deep corrections before price confirms weakness.
However, it is important to know where you are in a market cycle, and in midterm years we often see flat or low-single-digit returns—the weakest in the presidential cycle—with 10%+ pullbacks common pre-election. This, along with everything else I am seeing, has me cautious right now and in planning mode for the possibility of a larger dip. The bright side to the potential weakness is that the 12 months post-midterms have historically delivered strong rebounds, often 12–15%+ (sometimes higher), as uncertainty fades and focus returns to fundamentals.
This equity setup also fits my ongoing Bitcoin thesis: since October 2025, I’ve expected a choppier correction phase in 2026—creating solid long-term accumulation windows—before stronger moves into 2027–2029.
Bottom Line
There are many factors that I have discussed over the past several weeks that lead me to take a more cautious stance in the market right now. The historical realities of midterm years are simply the latest that I am presenting to you. We can’t control what the market does, but we can control our actions and how we respond.
Stay disciplined: respect key levels, manage risk tightly when uncertainty rises, and let price action dictate the next chapter. The market will tell us soon enough.
What are you watching most closely right now—SPY’s 100-day, QQQ’s potential reset, or something else? Drop your thoughts below.