The Nasdaq has dropped 4.6% in the past month. The index has been making lower highs and lower lows since peaking at the start of June. The technical chart shows significantly more downside to the bottom of the trend channel.

The chart is currently bouncing around the 50-day EMA and is holding above the 100-day and 200-day EMAs. The RSI momentum indicator is at 49, with plenty of room to drop further before reaching oversold levels at 30.

The question is whether this is a shallow correction that finds support around the 100-day EMA, as it did several times in 2025, or a deeper correction that drops to the 200-day EMA or lower to trend-line support.

I think it is most likely a shallow dip, given we just had a deeper correction in March and the big drops tend to happen once per year, with several shallow corrections in between. Also, there is progress in negotiations with Iran, a weak employment report that reduces the odds of a rate hike this year, and mid-term elections coming up, where the incumbent needs a strong economy, a strong stock market, and happy consumers to increase the odds of winning political power.

It is also worth reiterating that while many try to compare the current bull market with the dot-com bubble of 2000, this time really is quite different. The boom from artificial intelligence, semiconductors, robots, and other emerging technologies is real and driving massive new efficiencies and capital spending. This has a knock-on effect on several other sectors and is a key driver of GDP growth in 2026. Valuations certainly get stretched from time to time, but I think the impact is structural and not a hype-driven blip on the radar.

That being said, the technical chart has to give us pause, as it suggests a much deeper correction ahead before becoming oversold.

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Takeaway: While we can dip our toes into incremental new allocations on pullbacks, I think it is best to sit mostly on the sidelines with some extra cash for the time being. With a handful of stocks driving most market gains, we have to be extra cautious, as any shift in sentiment toward this small group can have an outsized impact on the market as a whole.