To The Moon

The latest rebound in $Invesco QQQ(QQQ)$  offers some encouragement for technology investors, but I don’t think the market has fully moved past its biggest uncertainties.

QQQ gained 0.61% on Tuesday, while the S&P 500 advanced 0.35%. Technology stocks showed renewed strength, suggesting investors are still willing to buy into the growth story. However, the unresolved US midterm election outcome and ongoing tensions between the US and Iran mean that confidence could remain fragile.

1. Earnings Growth Is the Most Important Bullish Signal

For QQQ, I believe earnings performance matters more than short-term political headlines. The technology sector has benefited significantly from AI investment, semiconductor demand and expanding data centre infrastructure.

However, there is an important distinction between companies benefiting from the AI boom and companies actually generating sustainable returns from it.

Strong chip earnings are encouraging, but I want to see that strength spread across the wider technology sector. If more companies deliver revenue growth, stronger margins and healthy cash flow, the rally will have a much stronger foundation.

2. Oil Prices Could Change Market Sentiment Quickly

The decline in WTI and Brent crude prices is a positive development. It suggests investors are not yet pricing in a major supply disruption from escalating tensions around the Strait of Hormuz.

However, this remains a risk worth watching. Any disruption to oil shipments could push energy prices higher, reignite inflation concerns and complicate the Federal Reserve’s interest rate decisions.

Higher oil prices could also put pressure on consumer spending and corporate margins. That would be particularly challenging for growth stocks, whose valuations depend heavily on future earnings expectations.

3. Bond Demand Will Tell Us About Investor Confidence

Another signal I would watch is demand for short-term US Treasury securities.

If investors increasingly move towards safer assets, it could indicate that concerns about geopolitical risks, inflation or economic uncertainty are outweighing enthusiasm for equities.

On the other hand, stable Treasury demand alongside moderating oil prices and improving corporate earnings would provide a more supportive environment for technology stocks.

4. My Outlook for QQQ

I remain cautiously optimistic about QQQ, but I would rather see evidence of a broader earnings recovery than rely on a short-term market rebound.

The AI investment cycle still offers significant long-term opportunities. However, valuations, capital expenditure and the ability to convert investment into actual profits will become increasingly important.

I would not chase every rally. I prefer to watch earnings revisions, semiconductor performance, oil prices and Treasury yields before increasing exposure.

My conclusion: Earnings breadth will ultimately determine whether QQQ can sustain its upward momentum. Oil prices may provide the earliest warning of trouble, while bond demand could reveal whether investors are becoming more defensive.

The biggest question is whether technology companies can continue delivering earnings growth strong enough to justify their valuations, even as geopolitical uncertainty remains elevated.

For now, I favour a selective approach rather than assuming every technology stock will benefit equally from the AI boom.

For discussion purposes only.