Why I Trimmed My QQQ Position in Mid-October

Trimming a market leader when headlines are roaring and index charts are printing new highs always feels counterintuitive. Back in mid-October, the Artificial Intelligence narrative was still running in full stride. Record hyperscaler capex announcements, relentless semiconductor demand, and endless bullish commentary had convinced broad market consensus that the AI trade had structural runway for miles. Enthusiasm pushed the Invesco QQQ Trust to fresh record peaks once again, and to most investors, the trend looked completely unstoppable.

Yet in technical risk management, narrative enthusiasm is often where investors get caught. While the fundamental AI story remained visually compelling, the weekly price chart was quietly painting a very different picture.

Taking partial profits in mid-October wasn't a bet against AI or a guess at an exact market top. It was the straightforward execution of a core technical rule: when price pushes to a higher high while underlying momentum fails to confirm it, market risk rises sharply regardless of how strong the narrative feels.

The Technical Setup: Price Higher High vs. RSI Lower High

The rationale for trimming comes down to a classic technical pattern on the weekly timeframe: bearish RSI divergence.

Looking at the weekly chart of QQQ, two contrasting trends emerged in mid-October:

• Price Action (Higher High): Driven by ongoing AI enthusiasm, the ETF pushed upward past its prior swing high, carving out a fresh peak on the weekly chart as buyers continued extending prices higher.
• RSI Momentum (Lower High): Concurrently, the 10-period Relative Strength Index (RSI) painted a very different picture. While price reached a new peak, the RSI peak reached a distinctly lower high compared to its previous rally peak, signaling underlying momentum loss.

In technical analysis, a bearish divergence occurs when buying pressure weakens even as prices push higher. It indicates that fewer market participants are driving the advance, leaving the asset vulnerable to a sharp momentum reversal once buying power dries up.