After hours on 20260205. $NASDAQ Composite Index(.IXIC.US) Have you noticed that most stocks fall after earnings reports are released, and the drops are quite dramatic.

My understanding is that this rally started on April 8 last year and continued until October 29, 2025, hitting a new high of 23,208, followed by a high-level sideways consolidation until now.

During this period, newly discovered thematic stocks started to rise, such as $Sandisk(SNDK.US) (8.29), $Intel(INTC.US) (9.29), and Micron (9.2), which have seen decent gains so far.

From another perspective, what kind of stocks would start rising so late? And why would they rise? My understanding is that leading blue-chip stocks drive the market, and when the rally deviates from valuation with limited upside, funds rotate to thematic stocks for the final frenzy of profit-taking. This is also why the Nasdaq has been fluctuating repeatedly.

Once all thematic opportunities are exhausted and stock valuations exceed rationality, with no substantial positive catalysts for the Nasdaq, unclear Fed policies, employment data falling short of expectations, and uncertainties like delayed non-farm payroll data and bank stress tests due to government shutdowns, the Nasdaq becomes more sensitive. As a result, almost all stock earnings reports turn from positive to negative catalysts, leading to irrational plunges amid high sensitivity and valuation corrections. Even earnings reports of high-quality stocks are harshly interpreted, resulting in misjudgments.

When all stocks deviate from valuations with no upside, the only way to correct is through declines, squeezing out bubbles and creating room for future gains.

If this logic holds, this downtrend could last for quite some time, possibly forming a step-by-step decline.

But don’t worry—as long as you hold core high-quality stocks, you don’t need to worry, because their core driver is performance, not narratives.

As for cyclical stocks driven by fairy tales, when they enter a stable phase of the cycle, what awaits them is a downturn—where they came from is where they’ll return.

For now, the Nasdaq has support at 21,898. This adjustment is good news for $NVIDIA(NVDA.US). Perhaps when earnings are released after hours on February 25, it will be treated rationally and could become a catalyst for market sentiment, acting as the blue pill to wake the Nasdaq up again. Since I hold it, I’m not entirely rational—there’s a possibility of self-delusion. It could drop to 168.

This article is just personal analysis, not pessimism, but a rational reminder to control risks.

As for those with severe emotional biases: Longbridge’s Three Fools + Longbridge’s Two Darlings, you have immunity and can ignore risks.