The Difference Between Being Early and Being Wrong

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Before we even get into the pullback levels everybody keeps talking about, there’s something important happening under the surface of this market.

Even on red days for the major indices, breadth has quietly been holding up much better than people realize.

You’ll see sessions where nearly 60% of the top 100 market cap stocks are green while the headline indices drift lower. That’s why there are days when the S&P 500 Equal Weight ETF (RSP) pushes higher while the S&P 500 (SPY) slips.

That tells you the weakness isn’t broad — it’s concentrated. And when weakness is concentrated, understanding which chart actually leads the market becomes incredibly important.

On Monday, SPY was pulling back a bit. Nothing dramatic considering how strong this rally has been. And technically speaking, there are three obvious pullback levels sitting right in front of us.

The first is around $725, near that recent gap-up area where the market paused briefly before the next leg higher. Roughly a 3% pullback.

Then you’ve got the $710 area, which lines up with a heavier consolidation zone and a cleaner volume shelf. Closer to a 5% pullback.

And below that sits $697, the prior breakout high and a historically reliable retracement level. Around a 7% pullback.

They’re all reasonable levels. All technically clean.

But here’s the issue: None of them really matter unless Nasdaq 100 (QQQ) confirms the move first…

SPY Isn’t Leading This Market

SPY and QQQ are highly correlated, but they don’t move with the same intensity.

In this kind of risk-on environment, QQQ doesn’t follow SPY — it leads it.

It reacts faster to shifts in momentum, risk appetite, and positioning. That’s been especially true lately with the Technology Sector (XLK) continuing to outpace the Communication Services Sector (XLC), reinforcing tech leadership across the tape.

That’s why I don’t see a world where SPY leads the next meaningful move by itself, whether we’re talking about continuation higher or a healthy pullback.

The level I’m watching on QQQ is $696.50 — last week’s low.

If QQQ closes below that level, especially somewhere around $692, then the market is probably telling you we’re entering a period of consolidation or digestion.

Not a crash. Not some catastrophic unwind. Just the kind of sideways reset that often follows a strong run.

And honestly, the odds of some massive correction right now still look pretty small to me.

For QQQ to fully retrace back toward prior highs after already recovering from one correction this year would likely require something like a double-digit midyear drawdown. I just don’t see that as the high-probability outcome here.

What I do see is a lot of traders making the same mistake: Using SPY as the primary confirmation chart.

That’s dangerous in this environment.

SPY can still look perfectly healthy while QQQ has already started signaling deterioration underneath the surface.

If you’re only watching SPY, you’ll think you’re buying a harmless dip while the actual market leader is warning you that momentum is fading.

That’s the difference between being early and being wrong.

QQQ for Confirmation, SPY for Execution

The way I’m approaching it is pretty simple…

QQQ gives me the signal. SPY gives me the execution levels.

Once QQQ confirms direction, then I start looking at SPY for cleaner entries, pullback zones, and trade structure.

Some traders don’t like using one ETF to guide trades in another because it feels too indirect or derivative. But markets work in relationships.

Certain instruments lead and others follow. Once you spend enough time watching the cadence, those relationships become very obvious.

And if you’re systematic in your trading, this process becomes even cleaner.

The system doesn’t care about emotion.

If leadership confirms continuation, you’re long. If leadership confirms pullback, you step aside and wait.

That’s really the whole game here.

Watch the right chart first. Then execute on the cleaner one.

QQQ confirms. SPY executes.

That keeps you aligned with momentum, aligned with leadership, and away from the kind of noise that traps most traders into reacting too early.

Now don’t forget to join us at 10 a.m. ET weekdays for Opening Playbook, and at 3:30 p.m. ET Closing Playbook!

Opening Playbook is a bridge for both new and advanced traders to go beyond outdated market narratives into deeper understanding, live at 10 a.m. ET Monday-Friday.

Nate Tucci
Tucci Trades

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