Mark Newton, CMT’s Post

Over $1.1 trillion in value wiped from the US stock market today This significant loss was primarily driven by the decline in the so-called "Magnificent Seven" tech stocks , which collectively lost $500 billion in market value on Wednesday. This loss adds to the $1.1 trillion erased from these stocks over the past five days. The S&P 500 also experienced a 2.3% decline, marking the end of its longest streak without a 2%+ drop since 2007. This sharp decline in the stock market has raised concerns among investors and analysts about the potential for further losses and market volatility. This is only the beginning of what is going to come! Buckle up! Sad for the US people.

How to take advantage of market correction? #Peter #Lynch said, "It's good when the market corrects. If you like a stock at $14 and it goes to $6, that's great! If you understand the company and its financials and are hoping for the share to reach $22,. Now, $14 to $22 is terrific. But $6 to $22 is exceptional. So you take advantage of these declines. The only question is: How would you know that a stock you averaged down has bottomed out? Well, nobody knows that. And nobody can time it. Hence, the best approach is to add that stock systematically. When the stock falls, many investors just keep waiting for the bottom. But trust me, it's impossible to time the bottom. I know its easier said than done. But the bottom line is that if you invest in fundamentally strong stocks, corrections should not create panic. They should only create opportunities.

Why September Spells Trouble for Stocks September is historically the worst month for US stocks. The S&P 500, over the last 96 years, consistently underperforms in this month. The Nasdaq, over the last decade, has seen significant drops—sometimes as much as 10%. Already, we’re seeing the S&P 500 down over 2%, and the Nasdaq dropping over 3% this month. Tech stocks like Nvidia have taken a beating, down nearly 10%. It’s not all doom and gloom, though—while September is notorious for stock sell-offs, the dips could attract buyers as long as the Fed keeps cutting rates. So don’t panic, but be prepared for more volatility as we move deeper into the month.

Why do stocks fall with earnings above expected values? Stock prices have imbedded future expectations into the price. Sometimes when the current price (with higher expected earnings) drops it’s because traders had anticipated larger growth in the future and current price has to adjust to more reasonable expectations of what’s actually happening. For example: a large tech company may have high earnings, but with expected advances in technology the stock price may be based on what they may earn in the future……which may be 4-5x what they are now. Stocks are usually based on earnings, but sometimes excitement adds multiples to the price and the magic is learning when it’s normal and when it’s danger.

Buy the rumor, sell the news This phrase means that you should buy a stock when there is speculation about good news, and sell it when the news is actually announced. This is because the stock price usually goes up in anticipation of good news, and then falls after the news is actually announced.

This Stock Has Just Had A MASSIVE Breakout🤯 $COMP: Compass, Inc. $COMP saw a massive breakout yesterday, which is quite surprising given the recent struggles of big tech stocks. We had $COMP on our high RS watchlist and considered entering a small 0.25R position, but decided against it due to the current market conditions and the CPI report scheduled for today. Despite this, $COMP remains a stock to keep on your radar. Its ability to push higher while the broader market is selling off suggests it has strong upward momentum and might be poised for further gains.

You may recall my post from last week that highlighted a couple of different CAPE index readings. Both were very high and portend potential difficulty for equity investors looking forward. Another, perhaps less formal insight, has to do with the % of stock ownership in 401(k) plans. From Glen Eagle trading - The average share of 401(k) plans allocated to stocks has reached 72%, its highest level since January 2001, during the dot-com bubble. Please recall that the stocks got crushed during the 2000-2002 correction, especially TECH when the NASDAQ declined -83%.

Bogeys, positioning & crowding A stock beats earnings by a wide margin (across all metrics/KPIs), but the stock still goes down. How is that possible? What about this: a stock beats earnings by a wide margin (including buy-side expectations/bogeys), yet it still goes down. What is usually happening in situations like this? To understand this and how stocks are likely to react, you need to know market expectations (bogeys, buy-side consensus, sell-side consensus), positioning and crowding.