Is a bottom in for the Nasdaq-100? Charts to watch - CNBC

(See the video above for Frank's complete chart breakdown.)

Is the Nasdaq-100's recent bounce a sign that the bottom is in? We're going to look at several charts to help answer that question.

First, let's remember how we got here. In September, the NDX broke out from a bullish cup-and-handle pattern, producing a 33,200-upside target. That breakout quickly failed, however, and gave way to a bearish pattern that broke down aggressively two weeks ago.

The decline brought the index relatively close to its 26,350 downside target before the current rebound began.

Zooming out, it's telling to see where the bounce originated. Three important forms of support converged in the 25,000-26,000 area:

This confluence of support helped encourage buying after a roughly 15% decline.

For perspective, we also see what larger drawdowns of 20%, 30%, 40%, and 50% would look like … a lot worse.

The following chart tracks NDX drawdowns from 52-week highs going back to just after the financial crisis. Only a handful of declines exceeded 20%, and three produced relatively quick reversals: late 2018, the Covid lows in 2020 and April 2025.

Historically, buying into declines of approximately 15%–25% has generally paid off, even when additional downside occurred first (yellow highlights).

The chart also highlights previous declines of 10%–16% in green, putting the current pullback into perspective.

The major exception was 2022, when the NDX eventually declined nearly 36% over approximately 10 months ... a much worse outcome, which many investors are concerned could happen again now.

That raises the key question: Are we experiencing another routine correction, or the early stages of a larger bear market?

One important clue will be how far this bounce progresses.

Any rally that fails to reclaim the previous highs could establish a significant lower high. Additional lower highs would provide stronger evidence of a developing, longer downtrend.

We saw this in March 2022, when that first sharp rebound effort failed to reach the previous high before a much more severe decline followed.

The bottom line: The current bounce is encouraging, particularly given where it originated and knowing how well buying prior 10-20% drawdowns has paid off.  

From here, it's all about the follow through.  We don't need to see new highs right away, but any rally from here that's met with another wave of strong selling could reignite downside momentum.

Frank Cappelleri is the founder and president of CappThesis, an independent research firm that helps active investors through time-tested chart and statistical analysis. Prior to starting CappThesis, he spent 25 years on Wall Street as an equity sales trader, technical analyst, research sales specialist and desk strategist.

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