This week calls for patience from investors. With a packed earnings calendar featuring reports from megacap companies including Tesla, Alphabet, IBM, Texas Instruments, and Intel, which helped power the recent rally, volatility is likely to remain elevated. After a strong run-up, a healthy pullback could serve as a much-needed breather, allowing the market to consolidate gains and set the stage for the next leg higher, rather than encouraging investors to chase momentum at potentially stretched prices.

Semiconductor and software stocks, which make up a significant portion of the Invesco QQQ Trust Series I $(QQQ)$, have come under increasing pressure in recent weeks. The semiconductor group has been hit especially hard, with the VanEck Semiconductor ETF briefly entering bear-market territory intraday on Friday after falling 20% from its most recent 52-week high, adding to the broader weakness in the QQQ. Against this backdrop, now is an ideal time to examine the ETF on both the daily and weekly charts to assess key support levels, momentum trends, and the fund's potential path forward.

The daily chart shows that technology has fallen out of favor since the beginning of June, as illustrated by the ratio chart versus the State Street SPDR S&P 500 ETF Trust. The Nasdaq-100 ETF is now 7% below its most recent 52-week high, while SPY is just 2% below its own peak, underscoring the recent shift in leadership.

Momentum has also begun to deteriorate. A bearish RSI divergence developed in May and June, with RSI posting a lower high even as prices reached a higher high, suggesting buying momentum was fading. Since then, the QQQ has fallen below both its 50-day simple moving average and 21-day exponential moving average, with the latter now turning lower.

The price action has become increasingly concerning. An upside gap fill on June 30 triggered a 6% drawdown through Monday's levels, coming just one week after a bearish island reversal was completed with a 3.3% gap lower on June 23. Taken together, the technical evidence points to additional downside, with a move toward $665 appearing possible over the near term, representing roughly 5% downside from current levels.

The Invesco QQQ Trust was trading around $700 on Monday.

The weekly chart highlights the powerful rally from the very round $400 level following the Liberation Day lows last April, sparked by a bullish piercing line candle. While the longer-term trend remains constructive, the MACD is on the verge of a bearish crossover, an early warning that upside momentum may be fading.

Another point of concern is the distribution that developed between last November and the end of the first quarter of 2026, when several weeks of heavy-volume selling emerged. To the ETF's credit, it responded with an impressive eight gains in nine weeks, although the advance occurred on relatively light volume.

The ETF remains comfortably above its mid-April double-bottom breakout pivot at $636.70, but recent price action suggests the rally may be losing steam. A pair of doji candles, a spinning top, and three weekly declines of more than 4% over the past seven weeks all point to growing fatigue. A pullback toward the rising 50-week simple moving average in the $645-$650 area over the coming weeks would be a healthy development, allowing the ETF to consolidate before potentially resuming its longer-term uptrend.

Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 20, 2026 14:38 ET (18:38 GMT)

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