Many of our strategies are mean reversion strategies such as V-Reversal. Extremely straight up or straight down moves that benefit trend strategies can setup mean reversion strategies to go through drawdowns.
Historically we have seen this cycle but it is very rare to have this much of a runup in relation to drawdown. This cycle has a greater runup relative to drawdowns than even the dot com era. During QE in 2014 and 2015 there were two runups with this ratio.
The longest of these cycles was 29-30 days in. We are 27 days into this cycle.
The Nasdaq-100 / NQ rally from March 31, 2026 through May 6, 2026 ranks as one of the strongest 26-session upside runs since 1997 when measured on 15-minute day-session data.
Using 26 full day-session windows (09:45 to 16:00, 15-minute bars), the period produced:
- Return: +23.09%
- Max Drawdown: -2.55%
- Return / |Drawdown| Ratio: 9.04
That ranks this move:
#8 out of 7,245 total 26-session windows since 1997
That places it in the top 0.11% historically.
Why this stands out
The most interesting part is not just the size of the advance, but the efficiency of the move.
There have been explosive rallies before — including during the Dot-Com era — but many of those tech-driven advances came with more volatility, sharper pullbacks, and less stable return-to-drawdown profiles. In other words, even when the upside was dramatic during the Dot-Com period, the path was often more erratic than what this 2026 run has shown.
That makes this move notable: it combined a very large upside advance with a relatively contained pullback, something that has been historically rare.
The main historical comparison
The higher-ranked windows in this study clustered primarily in:
- October–November 2014
- September–November 2015
Those periods occurred near the height of the Quantitative Easing (QE) era, when liquidity conditions were still highly supportive for risk assets.
What is especially interesting is that those top 2014 and 2015 windows extended over roughly 29 to 30 days, so if the current move were to continue in a similar pattern, there is historical precedent for these highly efficient upside phases to persist for about another month.
The difference is this:
- 2014 and 2015 delivered cleaner return-to-drawdown profiles
- 2026 delivered the larger upside move
So while the QE-era windows ranked higher on efficiency, the 2026 run has been more powerful in absolute return terms.
In 1998, during the dot com era, the Nasdaq 100 gained 33.38% in a 26 day period (10/08/1998 - 11/12/1998) but with a larger -4.54% drawdown and Return/Drawdown ratio of 7.35 versus 9.05 in 2026.
Top 26-Session Return-to-Drawdown Windows
15-minute day-session data, since 1997
Key takeaway
This was not the single best return-to-drawdown window since 1997.
But it was still one of the most exceptional.
It ranks in the top 0.11% of all 26-session windows tested, and unlike many historic momentum bursts — including those during the Dot-Com era — this rally paired a major upside move with a relatively controlled pullback.
If the move continues to behave more like the 2014–2015 QE-era windows, history suggests that these types of efficient advances can persist longer than many expect.
The bigger question is whether today’s market is being driven by a similar form of liquidity support, even if it does not look exactly like the QE period. Liquidity may be coming less from direct Fed balance sheet expansion and more from broader financial-system channels: elevated money supply, Treasury cash-management dynamics, bank reserves, repo-market liquidity, fiscal flows, and the continued after-effects of years of post-2020 monetary expansion.
That makes the current backdrop especially interesting. U.S. M2 recently reached a new high in March 2026, while the Fed’s balance sheet remains very large compared to its pre-2020 level. At the same time, incoming Fed leadership has signaled a preference for reducing the Fed’s footprint and shrinking the balance sheet over time. Reuters has reported that Kevin Warsh, nominated to lead the Fed, has argued for a smaller balance sheet, although analysts note that any meaningful reduction would likely be gradual and difficult to execute without affecting liquidity conditions.
That creates an important tension for markets:
Price action is behaving like liquidity is still abundant. Policy direction may be moving toward less balance-sheet support.
If this rally continues, the key issue may not simply be momentum. It may be whether the liquidity impulse behind the move remains strong enough to offset any future attempt to drain reserves or reduce the Fed’s balance sheet.
In that sense, the 2026 rally may be more than just a powerful upside move. It may also be a real-time test of how much liquidity remains embedded in the system after years of QE, fiscal expansion, and money supply growth.
Some rallies are powerful because they travel far. Others are powerful because they barely pull back.
This 2026 Nasdaq-100/NQ rally has shown both characteristics — a large advance and a historically strong return-to-drawdown profile — but the next test may be whether the liquidity backdrop continues to support that efficiency.
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