The Stock Market is Getting Too CHEAP to ignore

[00:00:00] Speaker 1: The NASDAQ is only 3% away from something that's happened five times in history. Three minus 10% corrections in the same month. Now, four of those times we were in a bear market. However, in 1999, we had three minus 10% corrections and the NASDAQ rallied from October of 99 to March of 2000, 117% gain. Now, the S&P 500 is back to its shenanigans, only down 2.5% from all-time highs as we continue to see rotation to rotation. So in this video, we'll go over whether we get three minus 10% corrections this year, what I think it means for the market. But more importantly, what are the opportunities we can take advantage of right now? Because believe it or not, regardless of what you're feeling in your portfolio, if you're struggling with this type of volatility, if we look at the price earnings growth, the market has never been cheaper in the history of the market because earnings have been absolutely killer. And if we take a look at the earnings that have been reported so far, 83% of the S&P 500 companies that have reported so far have beat on earnings per share. And so far, we are still tracking for a 29.5% year-over-year earnings growth for Q3 2026. And let's not forget the perfect record for the S&P 500 right after the midterms. And with tech valuations extremely compressed, I'm definitely looking at positioning myself in tech stocks once again, especially in light of some major pullbacks since the last time that we did a video. It's crazy how fast things change, man. In my last video, I said that I don't think there is an opportunity in tech here, as tech XLK, the S&P 500 tech sector, has made an all-time high. Since then, we have pulled back almost 10%. And if you look at consumer staples, where we talked about there might be an opportunity, this has rapidly gone to an all-time high, now up 10% since the beginning of October. So this rotation continues to be violent and continues to be ever-present. We'll also get into where I think in the market cycle we are in, according to this. And I will give you an update on my very tech-heavy portfolio, considering the drop in XLK and in QQQ that we've experienced in the last couple of weeks. Let's get right into it. Now, last week seemed extremely violent for some people. But if you look at the S&P 500 and the NASDAQ, last week, the S&P 500 was down just 0.4%. And the NASDAQ, which to me, when I looked at this, it was surprising, was down only 0.76%. Now, the reason that is, is because if you looked at Thursday, Thursday alone, the NASDAQ was down almost 3%. And the semiconductor index was down almost 7%. Now, we did manage to sweep OPEX low from October. We also did sweep September OPEX. And we are sitting right on the low from the last FOMC. Now, if you contrast this with the week prior, the week prior, we were down almost 6%. So we have definitely cooled off a bit in terms of the momentum downwards. And eight of the 11 S&P 500 sectors were green with energy, healthcare, real estate, utilities, materials, consumer staples, financials, and consumer discretionary leading the way. And technology, industrials, and communication services were the ones that were in the red. Now, one of the good signs here, and there are a few good signs to discuss, but one of the reasons why I think I still attribute this to midterm volatility, midterm seasonal volatility, is because we are seeing yields top even as oil is spiking. So the bond market is not pricing in a new wave of inflation here, and it is happy with the yield. So we could see the two-year, 10-year, 30-year, all of these treasury yields have topped out and have since declined from their highs, all while oil is still going nuts because of the geopolitical tension with Iran. Ironically, the same thing happened during, with the 10-year, the same thing happened with Trump's first midterm year in 2018. Even as the Fed did raise rates in December of 2018, and there is a chance that they still raise rates in December of 2026, if we take a look at the FOMC watch tool and go to December, you could see that a raise is still the most likely scenario here, although this percentage is dropping. The 10-year yield also did get below 5% for the first time since September, and it did close just below 5% at the end of last week. And before we get into the rest of the analysis, and I tell you how I'm positioning in terms of the stocks that I want to buy and whether I'm going to be swing trading or not, just a quick bit on what is to come because the next couple of weeks are going to be insane. We have continuation of earnings, so Visa, Microsoft, Alphabet, MasterCard, Eli Lilly, Amazon, Exxon Mobile, Apple, AMD, NVIDIA. On Wednesday, October 28th, we have the FOMC Fed meeting. 91% chance that the Fed actually keeps rates steady, which they probably will. And then we have Q3 GDP and core PCE on Thursday, October 29th. Tuesday, November 3rd, we have the midterms, and then Treasury refunding on Wednesday, November 4th. And we will find out whether Scott Besson is going to reduce the 20-year Treasuries or cut them entirely. All right, so will we have a potential three minus 10% corrections in the same year for the NASDAQ? Now, we've already had two, one of minus 12% and one of minus 11%. We are down 7% from all-time high closes on QQQ. Will we have another minus 10% correction? And what does that mean? As we said, the only other times that the S&P 500 has, or the NASDAQ, has experienced minus three 10% corrections were 87, 2002, 2008, and 2022. The one time that it happened when not in a bear market was 1999, although we did hit a bear market in March, but the NASDAQ went 117% from October 99 to March of 2000. Now, we are dealing in the fringes here. So whether the NASDAQ drops an additional 2%, I certainly think it's possible, but I still think that this is attributed to midterm seasonality. So if we take a look at the top holdings in the NASDAQ right now, NVIDIA, Apple, Microsoft, Micron, Amazon, AMD, Tesla, Meta, Alphabet. What I like to do is look at these charts and determine where they are individually since they make up most of the NASDAQ. NVIDIA is sitting right on the 100-day moving average after crushing earnings with a record year. Apple is sitting at all-time high here. It doesn't come with the burden of AI CapEx and is not really involved in the hysteria. Microsoft basically got to the all-time high, creating a triple top here. Micron hasn't hit the 200-day since May of 2025. And if you look at its brother, SanDisk, it is sitting on the 200-day moving average. And although I'm bullish on Amazon, obviously for the long term, its short-term chart is one of the messiest, but is a few points away from the 200-day moving average. Meta looks like it's sitting at support. And if you take a look at Google, which reports this coming week, it looks like it is also sitting at support, even though it lost a 200-day moving average, but it's sitting at this support level right here at 315-ish. So the question is, could the NASDAQ deliver another couple of percentage points drop based on where the top holdings are? In my opinion, yeah, it could. But here's why I don't think that this will lead to catastrophe here and why this is an extreme buying opportunity. The price earnings growth of the S&P 500 right now is the lowest that it's ever been, right? So this is price over earnings growth currently sitting at about 0.72. That is insane. That is lower than the 2008, the bottom of the financial crisis. That's lower than the 2020 COVID pandemic. That's lower than the dot-com bust. So the price of stocks relative to earnings growth just, I mean, that chart just looks ridiculous. If you look at information technology currently trading at less than 20 forward PE, that is the line in blue. And we compressed from above 30 just a few months ago to now less than 20. Look at that earnings compression. And none of this is close to what we saw in 2020, 2021, even last year. Certainly not close to what we saw during the dot-com bust. And in my opinion, any declines here, whether we do hit that extra couple percentage points on the NASDAQ or not, any decline here will be welcome because in my view, it will lead to higher disproportionate gains after the midterms. One other thing, in my opinion, as I said, yields look like they have peaked already because when yields start dropping, even as the bad news is not over, and even as things like oil prices continue to spike, then we are seeing a demand for bonds. We're seeing a demand for yield and the bond market is not pricing in catastrophe. And the bond market, in my opinion, is right way earlier than the stock market is most of the time. Now, the last time that the 10-year peaked was in October of 2023. The S&P 500 bottomed and rallied more than 35% over the next 12 months. Now, remember, we were coming out of a bear market. But in my opinion, we are in a rolling or a structural bear market, or we have witnessed that during this cycle. As we said, so many stocks were down over 20%, 30% from their highs. We had structural bear markets in certain sectors, while other sectors were keeping the indices alive. And breadth is finally improving. So shout out to Tom McClellan, one of the GOATs. But in his chart, he shows that the breadth, the number of NASDAQ stocks that are above their 100-day moving average are finally trailing into positive territory, where they were beaten up for months now. And when we tend to see this move back into positive territory, and we now have positive divergence between the NASDAQ index itself and the number of stocks that are above the 100-day moving average, in my opinion, that is not a bearish overall sign, especially for breadth. And if we take a look at another breadth signal, this was from October 20th, finally, the number of S&P 500 stocks that were above their major moving averages was 402, whereas breadth was extremely low during the beginning of October. And then on to this sign here. So I've been around euphoric markets before, right? And this right here, in my opinion, is not how euphoric markets end. Are we in this area here where we've already seen peak euphoria, and we have now retraced up slightly, and we're about to break down into a bear market, or are we in the bear trap sentiment after the first extreme? And in my opinion, we have not seen peak euphoria just yet, especially at those valuations. I think we saw a sentiment extreme. You saw all of the AI build-out stocks, whether it's in photonics, data centers, memory. You saw those stocks rally, even while the MAG7 was not really rallying with them. And those stocks have now broken down in terms of their valuations. Their price earnings were compressed, and now we are seeing an overall destruction in sentiment. Peak euphoria is like that period between October 99 and March of 2000, when the Nasdaq gained 117% in five months. I'm not saying that's going to happen, by the way. I don't think that's going to happen. But I'm just giving you an example of what peak euphoria looks like. If you look at the SPY returns over the last 12 months, the SPY is up 12% this year. To me, that's not peak euphoria. That is an extremely vanilla and regular year. So how am I positioning here? Again, if you remember when I said that I don't think, if you did not buy tech stocks, I don't think that there's an opportunity in tech stocks when we were talking in the beginning of October, because XLK was at an all-time high. And the stock prices of tech stocks were, to me, did not represent an asymmetrical opportunity. However, since the beginning of October, tech is now down almost 10% once again. And if we take a look on Alphascope, shout out to Alphascope, as always, providing the best, most concise fundamental analysis. Get a free trial below, by the way, seven days free. Otherwise, it's only $19 a month, which is insane. But 18 forward PE on Meta, for instance, if you take a look at Amazon, you can see that we're sitting at a 23 forward PE. If you take a look at Alphabet, we're sitting at a 24 PE. This is just wild work here by the best companies to ever exist on planet Earth. So I don't think now that you can go wrong with buying any of the proven tech stocks that generate cash. Now, Meta did fall into Google territory, reporting negative free cash flows for the first time since 2012, as you see here. And I think that that will benefit investors who want an asymmetric opportunity to buy these stocks for the long term, because obviously the market does not like negative free cash flows. But remember that these companies, once they stop spending, their cash flows are going to spring back, are going to bounce back like crazy. And they can essentially turn on free cash flows whenever they want. If we take a look at the scoring system, the Traveling Trader Proprietary Scoring System that we created, and we published this in the Traveling Trader Academy, if you look at Google right now, it is the best scored stock out of the stocks that are in our portfolio, followed by Novo, ASML, NVIDIA, Microsoft Meta. But you can see all of the major tech stocks are scoring extremely high right now. And I just want to pause real quick and say that if you've wanted to learn technical analysis, and I'm a huge believer in simplifying technical analysis, you do not need to be a genius to do TA. But just a little bit of time, just watching a free video will improve your TA exponentially and will get you to the point where you can line up your fundamentals and your technicals to improve your buy points, for instance, on stocks that you want to own. If you wanted to dive into swing trading, we'll teach you the fundamentals or the pillars, the building blocks of how to do technical analysis, whether you want to swing trade or whether you are just looking to get better at establishing buy points for the stocks that you want to own. Make sure that you click the link below. This is absolutely free. I will send you a video, a free training on technical analysis. And this also will include the stock fundamentals bundle, how to evaluate a stock, how to research a stock, how to read a 10K or a 10Q financial statement. Both of these things should improve your investing and trading game exponentially. So make sure that you get those. Back to the video. And if you watched my last video about neoclouds, I talked about how neoclouds are not my favorite type of investment. I personally am not invested in neoclouds for the long term. But there comes a point at which their destruction and valuation becomes too risky to ignore, at least in the midterm. And I am looking at this sector intently to see if there are some buys that we can make, especially if we get another wave of euphoria once again. I think semiconductor stocks here are almost a no brainer. So if you look at the SOXX ETF, it's sitting at the 200 day moving average. And although there is a chance that we could take out that July low, you're talking about a sector that is already in a bear market. So I do think that there are so many buys in semiconductors that are looking attractive, whether it's ARM. I'm waiting for ARM to get to this level here where we had equal highs. Basically, the resistance turned potential support at around the 180-ish level. Stocks like Broadcom, Marvell, I think that once the market bounces back and we clear the air from this midterm volatility and we enter this period here, I think those stocks are going to see violent bounce backs. Now, obviously, it's much more than just looking at a chart and being like, I want to pick that ticker and I'm just going to buy it. You have to know about the company that you're investing in if you are long term investing. And every single day in the Discord, in the Traveling Trader Academy, I do deep dives in stocks that I'm looking at. And these are some of the most detailed deep dives that you will find. I match up the fundamentals with the technicals. We take a look at the metrics from Alphascope as well. I give you insight into which stocks I'm watching. You can see here Marvell, 200 moving average on watch. ARM at the 200-day moving average. But I'm looking at the 180s. I also go live every single day at Market trade open to trade the market and do my daily analysis for you guys, as well as swing trade. My last message, my last swing trade, as I said, I mean, what I tell you guys in this video is what I actually implement in real life that I don't think this is a swing friendly environment. On October 19th, I said no swings for me just yet. I still think NQ is vulnerable and can take out all of these gains. And if you look at NQ compared to that chart, you could see we did, as a matter of fact, take out all those gains and then some. So on the swing trading front, for me, this is still not a swing heavy environment. I do not like to swing trade when the market is in a rough patch and just grinding it out every day. Whether we get that 10% drop or more, or we start rallying from here after earnings, after midterms, and after FOMC, you want to see this kind of market. And then you put your foot on the gas as it relates to swing trades. And I'm okay being much more focused on long-term buys that I want to pick up here at a discount. And I will be doing a midweek video this week talking about some of these stocks that I'm looking at to pick up and get breakdown some fundamental analysis as well. So make sure that you turn on your notifications and watch out for that. Otherwise, I will see you in the discord if you join or if you're already a member. And I will also be going live for FOMC. So look out for that as well. Let me know in the comment section below, what stocks are you looking to buy now that we are getting some pretty deep discounts depending on which pocket of the market you're looking at and whether you think we are going to hit a bear market or is this just typical pre-midterm seasonality. Subscribe to the channel, hit that notification bell, stay safe out there traders. Peace. Peace.