NASDAQ Correction: Don't Panic! (Here's What To Do)
In a Nutshell
NASDAQ has entered a 10% correction after hitting 762 on QQQ, driven by AI infrastructure debt concerns and political uncertainty ahead of midterms. Traders should avoid shorting or using leverage as beginners, focus on risk management during volatility, and view this as a potential dip opportunity for long-term quality holdings rather than panic selling. Live positions included profitable INTC and MSTR shorts totaling over $7K, with AMD earnings expected as the next major catalyst.
These notes were generated by AI and may contain inaccuracies.
The NASDAQ market has officially entered a correction. The QQQ ETF hit highs of 762 on October 6th, and is now down 10% from those recent highs, representing a 10% drawdown in approximately 28 days. The market reached lows of nearly 11% from the overall lows made the previous day.
A correction means a 10% drawdown from recent highs. The NASDAQ made new all-time highs at 52-week highs before experiencing this rapid shift in sentiment. The correction does not indicate the end of the world, nor has the market consistently made aggressive new lows.
Several factors may be contributing to the current market conditions:
- Concern about how much the MAG7 companies are borrowing to build out their AI infrastructure
- Despite reporting great earnings, these companies still experienced selloffs
- Potential shift in the political landscape, as markets performed well during the Republican administration and the current administration has been favorable toward AI buildout
- Democratic tone has been less supportive of AI and the AI buildout, with a proposed bill that would not offer bailouts to AI companies if they begin to default
Markets will react after the midterm election concludes following market close into overnight hours. There is approximately a 70% probability that Democrats are likely to win. Trump has stated he will become the "veto king" and block anything Democrats attempt to push through, resulting in nothing getting done for the next two years. JD Vance has appeared on social media requesting another chance for additional years in power.
The focus should remain on helping Americans achieve a good quality of life regardless of political affiliation. Both political parties have failed to improve the quality of life for average Americans. Government representatives work for the people and should prioritize creating better conditions for most Americans in the United States.
The main concern centers on Trump's potential reaction if Democrats win the midterms. Key questions include whether Trump will unleash previously restrained attacks against Iran, and what impact this would have on oil prices, inflation rates, and Federal Reserve policy decisions in upcoming meetings.
Multiple trades were executed during the live trading session:
- INTC short: Initial short position, bought to cover, re-entered short, then bought to cover again, resulting in $5,100 profit for the day with position fully closed
- MSTR short: Overbought reversal trade taken with the LPP team, described as a small short position, generating $2,200 profit for the day with position still open
Technicals mean nothing during news-driven market days where sentiment can shift rapidly. When opening positions during volatility, traders must remain mindful of their exposure and accept the risk of any open positions. There is nothing wrong with being invested in good quality companies for the long term, but investors should avoid positions they cannot tolerate.
Current market conditions show:
- Fear present in the market with valid reasons behind it
- Potential for this to be a good dip opportunity
- No confirmation of a reversal yet
- For long-term investors, going long makes more sense than going short
Important restrictions for beginners: Beginners should not be shorting and should not use leverage when buying the dip.
Actions, intentions, and trades must align with established criteria rather than focusing solely on best-case scenarios. Worst-case considerations must also be factored into decision-making. Hoping to do well is insufficient—trades should be executed based on earned outcomes rather than hopeful expectations.
AMD reports earnings after the bell and represents a major player in AI infrastructure, which could provide either positive or negative catalyst depending on reported results versus market expectations. Live trading sessions occur every morning during the current week, with LPP 3.0 offering access to live trading starting the following day at market open.
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