QQQ after a 3% drop: How the next-day bounce stacks up

QQQ was trading at $703.42 at 12:35 p.m. PT on October 22, down close to 3% on the day. So we asked a simple question: what usually happens the day after QQQ falls 3% or more?

Short answer: it tends to bounce a little, but the edge is small. The bigger story is how much it swings.

We found every day QQQ closed down 3% or more since March 2011, 78 in total, and checked what happened next. Each result is compared with an average day. Our data starts in 2011, so 2008 isn't included.

1. A small bounce, on average. QQQ closed higher the next day 58% of the time, versus 56% on an average day. The average gain was +0.49%, but the median was only +0.20%, so a few big up days pull the average higher.

2. The real change is bigger swings. Next-day moves were about 1.8 times larger than usual. They ranged from −9.2% on March 11, 2020 to +8.5% the very next day.

• 3. The bounce happens during the day. The next morning opened about flat on average (+0.09%). Most of the gain came between the open and the close.
• 4. Bigger drops bounced more. After drops of 4% or more (29 cases), QQQ was up the next day 66% of the time, by +0.81% on average.
• 5. The long-term trend matters most. When QQQ was still above its 200-day average, 74% of cases were up 5 days later and only 4% fell another 2% or more the next day. Below the 200-day, those numbers were 57% and 10%.

A 3% drop in QQQ is not a reliable buy signal on its own. The next day is only slightly more likely to be up than any other day, and the moves are much bigger in both directions.

The setup looks best when QQQ is still above its 200-day average and the drop was 4% or more. Keep in mind that about a third of the cases come from 2020 and 2022, so a few selloffs drive these averages.