Nasdaq Dips Into Critical Support Zone, Sentiment Shifts

Author: The Arora Report | November 07, 2025 11:46am

Critical Support Zone

Please click here for an enlarged chart of Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Note the following:

• The chart shows QQQ gapped down.
• The chart shows that subsequently a rally brought QQQ to the bottom of the gap.
• The chart shows that instead of another rally to close the gap, as has often been the case in this bull market, QQQ fell.
• The chart shows that QQQ is now in zone 1 (support).
• RSI on the chart shows that even though QQQ is not oversold, it is getting close to being oversold.  Oversold markets tend to bounce.
• In our analysis it is critical for this support zone to hold for the uptrend to stay valid.
• If there is a break below zone 1, zone 2 (support) shown on the chart will come into the picture.
• In our analysis, due to the calendar, the probability of a break below zone 1 continues to remain low unless there is any new development.  If this was occurring in September or October, the probability of a break below zone 1 and a move to zone 2 would have been high.  However, it is November and the year end chase is ahead.
• Two possible triggers to the upside are:
  • The government reopening
  • Fed officials, especially Fed Chair Powell, indicating a rate cut in December
• The FAA is cutting flights due to some air traffic controllers not showing up to work.  Air traffic controllers are not being paid due to the government shutdown.   Flight cuts may be the pressure needed to bring Republicans and Democrats together to open the government.  When the government opens, there will be an immediate surge of economic activity.
• For today, Fed Vice Chair Philip Jefferson has said:
  • "It makes sense to proceed slowly as we approach the neutral rate."
  • It will be a close call if the Fed cuts rates in December or not.
  • Tariffs may be keeping prices high while progress is being made on the underlying inflation.
• Sentiment is fluctuating wildly.  Sentiment has shifted from extreme positive to very positive in a day.
• NVIDIA Corp (NASDAQ:NVDA) and Tesla Inc (NASDAQ:TSLA) play a big part in sentiment.
  • There are reports that the government is making it difficult for Nvidia to export throttled down AI chips to China that were specifically designed for the Chinese market.
  • Tesla shareholders approved the $1T pay package for CEO Elon Musk with 75% in favor.  75% is significantly more than the consensus.  Initially, TSLA stock jumped on the news.  Bulls were expecting TSLA stock to breakout and quickly move to the $500 magnet as Musk made highly ambitious promises.  In fact, the reverse has happened, and this is denting sentiment.
• The official jobs report will not be released today due to the government shutdown.

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks.  For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis. 

In the early trade, money flows are neutral in Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT).

In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), Nvidia (NVDA), Alphabet Inc Class C (NASDAQ:GOOG), Meta Platforms Inc (NASDAQ:META), and Tesla (TSLA).

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE:SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust (GLD).  The most popular ETF for silver is iShares Silver Trust (SLV).  The most popular ETF for oil is United States Oil ETF (USO).

Bitcoin

Bitcoin (CRYPTO: BTC) is seeing selling.

What To Do Now

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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