QQQ Falls as XAR Rebounds on Defense Demand

That tension is visible in the market data. The Nasdaq-100 proxy QQQ fell to 674.76 on Nov. 10 after touching 647.05 four days earlier, still well below its 50-day moving average of 719.2 and with a 14-day RSI at 35.9, a level that suggests persistent downside momentum rather than a clean recovery. The S&P 500 is no longer in outright panic, but Adalytica’s trade signals still show sentiment only neutral at 60, even as awareness sits at “Extreme Greed,” an indication that investors remain highly focused on the move but not fully convinced it is over.

Defense shares are telling a different story. The iShares U.S. Aerospace & Defense ETF, XAR, rebounded to 236.62 on Nov. 10 from 214.23 five days earlier, pushing back above its 50-day moving average of 233.58 and easing some of the damage from the earlier selloff. The sector remains below its 200-day average of 262.42, so the longer-term trend is not fully repaired, but the bounce shows investors are still willing to pay for defense exposure when broader equity risk appetite is fragile.

The macro backdrop reinforces that view. The 10-year Treasury yield is hovering around 4.88%, after a forecasted dip to 4.832, while the fed funds rate is projected at 3.89% in November. That combination leaves markets in a difficult spot: yields are high enough to pressure long-duration growth valuations, but policy is not loose enough to justify a full-on expansion trade. For megacap technology, especially AI-linked names, that is a valuation headwind. For defense, it is less of a problem because the investment case rests more on budget visibility and backlog than on discount-rate sensitivity.

The defense complex also has fundamental support. General Dynamics said its total estimated contract value reached $270.7 billion in early October, while Northrop Grumman reported backlog growth across its defense businesses, and Boeing’s defense segment backlog rose to $100.5 billion at the end of September. Those figures matter because they turn geopolitical tension into visible revenue pipelines, allowing investors to underwrite earnings with less dependence on the business cycle.

That is the core narrative connecting the two trades: the market is cooling on expensive growth assumptions while paying up for hard assets tied to state spending and security demand. In the US, the administration may have less direct influence on markets than investors once assumed, but it still has leverage over the two themes driving this tape — the cost of capital for tech and the scale of rearmament for defense. If the tech correction deepens, it will likely reflect another leg of multiple compression. If defense keeps outperforming, it will be because governments keep acting like permanent customers.

For investors, the next test is whether the tech pullback becomes a deeper de-rating or merely a digestion phase, and whether defense can hold its rebound if equity volatility fades. Earnings, budget guidance and any shift in Treasury yields will determine whether this is a temporary sector rotation or the start of a more durable reallocation away from AI exuberance and toward military-industrial cash flows.