Thursday, 25 July 2024

Making sense of a meltdown

And what’s next for chips in particular
 
   
     
   
 
JULY 25, 2024
   
GROUND LEVEL INSIGHTS
Making sense of a meltdown
 

Hey y’all, 

(You know, I never really used the phrase “y’all” until I spent three years at a southern seminary in St. Louis — I feel like I earned my “Southern Gentleman” privileges and now I get to use “y’all.” It’s honestly just so useful!)

(But that’s neither here nor there…)

Yesterday was a rough day in the markets, especially for anyone invested heavily in the Mag7 or chip stocks. 

This tweet around 2pm ET pretty much says it all…

 
 
All of the top tech stocks were crushed, and the Nasdaq 100 had its worst close since 2002 — never a great sign.

Understandably, when I reached out to folks yesterday to get their top questions for our experts, a lot of people were focused on chip stocks.

One particular member (I forgot to put a name box in the survey — my bad! I’ll correct that in the future) asked: “Do semiconductor look okay like NVDA AVGO?” 

So I went to each of our experts and got their takes on it. Let’s dive into what they said! 
 

If you know Jeffry, he’s a pretty pragmatic guy and doesn’t mince words. He was pretty blunt when I asked him what he thought: 

“Called it for 6 months. And there is still plenty of air in there.” 

In other words, JT thinks that the chip sector has been overinflated for a while now, and he has been calling for a regression for a bit — on his daily “Morning Monster” sessions over on Youtube, he talks about it frequently.

He elaborated: “Yesterday is what happens when there are no shorts left in the market to start covering on a big down day.”

He also warned: “if we make a lower low in the S&P tomorrow (lower than today or anything this week) then we put into play an adage that markets don't typically bottom on Fridays and there become odds around 90% that we see a lower low before FOMC next week.”

But is he totally pessimistic? Not entirely… 

“That said I bought the crap out of longs when the /ES gap filled the June contract rollover.” 

 
 

One of the things I love about our experts is that they are in the markets every day, trading with their own real money. 

Sadly, that’s not universally true when you hear advice from financial “gurus,” but with our guys, on days like yesterday, if you had a rough day, chances are, they did, too.

And Nate made no bones about the fact that he took it on the chin on Wednesday: 

“I do have Nvidia and am taking a lovely beating along with my overall QQQ position which is tech-heavy.” 

He added: “I think there is plenty of room for a continued sell off…” 

But he clarified: “I am still going to hold to my original prediction that we'll get some sputtering in July, bullish through November and then a much deeper correction after the election.”

I’m sure I’ll be picking these guys’ brains a lot on the election in the coming months. What a crazy week it’s been in politics! But that’s another topic. Let’s hear from Graham…
 

Graham offered great perspective when I reached out to him. 

He shared this chart, noting that yesterday’s action was “seasonally very normal for chips.” 
 

And he admitted: “there definitely is air, there definitely is hype -- potentially more downside to come…” 

But for any chip owners out there who are worried and thinking about selling, Graham says, “Not so fast…” 

“10 years from now I'd bet everyone wishes they could go back to today and buy NVDA… same goes for AAPL… and funny enough, same goes for SPY!” 

 
Making Sense of a Meltdown

Why do days like yesterday happen? 

There isn’t always a clean cut answer. Graham said he assumes bears were at the wheel, plus big institutions taking huge profits on tech and chips. That’s probably a big part of it.

But the truth is, we can’t know why they happen all the time. But we have to adjust to the fact that they do happen.

And the key thing is not to panic.

Like Graham said, there are probably a lot of folks out there who panic-sold their NVDA shares yesterday that will really regret that in 10 years.

As corny as it is to say, this is a marathon, not a sprint, and we can’t let one bad day in the markets shake our confidence! Keep your chin up and get back out there.

Best Wishes from the Gateway City,

Stephen

P.S.: I thought Geof was on vacation and wouldn’t answer, but check out this FREE trade tip he shared when I asked the guys for their feedback. By the way, if you’re in the ProsperityPub FREE Telegram channel, you could already have gotten this tip. But if you’re not, sign up here so you don’t miss the next one! 
   
 

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