Are we crashing?… enormous fear in the market… checking in on our A-B-C Exit Plan… are you making this investment mistake?… a famous bear is not “in sync with the markets”… last call for Jonathan Rose’s Profit Surge Event
Brace yourself. We’re about to have a massive, portfolio-crushing crash.
That’s how it feels to many investors right now.
But in Friday’s Growth Investor Flash Alert, quant legend Louis Navellier urged investors to recognize the opportunity amidst the panic:
I realize there’s a lot of anxiety out there… Everybody’s very nervous.
But we’ve gone from being overbought to now grossly oversold.
So, there are a lot of good buys right now.
Stepping back, here’s Louis’ explanation for how we went from last month’s all-time high to our current gloom-and-doom:
The first shock was on Wednesday, October 22. That’s when the top 300 stocks in the Russell 3000 – 300 stocks, the best performers since August 1 – had a 5.73% correction intraday.
So, that was a mean reversion algorithm. It was violent and it really wrecked the market.
When you have these shocks to the system, you have to have aftershocks. And normally, you retest the lows and then you move on.
Well, [last Thursday], we blew through the lows on the NASDAQ – not on the Dow or the S&P, but on the NASDAQ.
But while that’s intensifying the angst we’re seeing today, Louis reminds his subscribers that good stocks “bounce like fresh tennis balls” and not to be “concerned about these market gyrations.”
Still, the anxiety that many investors feel today raises “the” question of the moment…
Where are we relative to the top, and what’s the plan?
As regular Digest readers know, our plan is to track this bull market’s final innings with the “Crazy Map” we introduced earlier this fall. If the market rolls over, we’ll eventually exit within a reasonable window after what we believe is the top, guided by Senior Analyst Brian Hunt’s A-B-C framework (detailed in this Digest).
As a quick reminder, with the A-B-C framework, we’re watching a sequence including:
- A six-month downside breakout (A)
- Trading below a declining 200-day moving average (B)
- A new series of lower highs and lower lows on the way to a new 12-month low (C)
With that context, below is the S&P with its 200-day moving average, beginning in 2023.
As a hint, you’ll find that we’re nowhere close to…
- A six-month downside breakout…
- Or a declining 200-day moving…
- Or a new 12-month low…
But here’s something critical to recognize…
For the S&P 500 to even touch its 200-day moving average, it would require a drawdown of almost 9%. And Brian’s A-B-C signals don’t trigger until we fall below that level.
So, if the recent top-to-bottom ~2.5% dip in the S&P and ~4.5% retreat in the Nasdaq has you rattled, that’s a sign of something important…
You could be measuring your risk with the wrong yardstick.
Are you making this mistake?
Many investors subconsciously anchor their emotions to the peak value of their portfolio.
How many times during a market drawdown have you done some quick math, then concluded…
I’m down X% from my high.
But here’s the truth…
Your high-water mark shouldn’t define or influence your market decisions. Your process should.
Following Brian’s A-B-C Framework, our eventual exit will come well after a peak, once the triggers materialize. But this means that being some distance below our all-time high won’t be a failure, it’ll be the expected – and accepted – cost of capturing the bulk of a bull market’s gains.
Now, you don’t have to go that route. If you’re nervous about what could be coming and don’t want to lose 9% (likely more), you can go into full defensive mode today.
But what if you’re wrong?
As the great Peter Lynch once said:
Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves.
Last week brought a great example of defense gone wrong
A letter from Michael Burry began circulating on the internet last Thursday.
Burry is the investor who famously shorted the housing market during the 2008 crisis. The bet turned into the movie, “The Big Short”, with Steve Carell playing Burry.
For about two years, Burry has been positioned for a major stock market decline. He has repeatedly warned about excessive valuations, speculative excess, and structural risks. And he’s expressed those views through aggressive bearish bets.
But the letter from Burry’s Scion Capital group reveals that he’s closing his fund and returning capital to shareholders.
Why?
Because over the last two years, while Burry has expected dramatic pullbacks, the Nasdaq has returned almost 70%.
From Burry to his investors:
My estimate of value in securities is not now, and has not been for some time, in sync with the markets.
Now, Burry is a brilliant thinker. So, his decision reminds me of a critical reality…
I can’t call “the top”
Odds are, you can’t either.
Plenty of incredibly smart investors have been wiped out…or sidelined for years…or been out of the market while a bull market raged…because they believed they could identify the moment the music would stop.
That’s the danger of anchoring to your high-water mark or assuming the top must be close.
The truth is that trying to pre-empt the top or protect your peak portfolio value is often far more costly than accepting that you’ll give up a portion of your gains after the top is in.
The good news is that you can choose how much you’re willing to pay in your quest to ride all the way to the peak – it’s the amount you’re willing to give back on the other side.
Bottom line: If this market is giving you a scare, clearly identify how much you’re willing to pay to reach “the top.” You’ll sleep much better going forward.
Circling back to the selloff…
We just got Louis’ perspective, which we can boil down to “if you’re holding fundamentally strong stocks, don’t stress – look for buying opportunities.”
Let’s now check in with our technology expert, Luke Lango, editor of Innovation Investor:
[Last week] stocks got absolutely hammered, extending what is now the worst correction on Wall Street since the April crash.
And the culprit, of course, is AI spending fears… again.
We don’t agree with these fears.
Why? Because the ROI on AI is not theoretical anymore – it’s showing up in the data.
The St. Louis Fed just dropped a blockbuster study showing that since ChatGPT launched, every 1% increase in AI-related time savings has corresponded to 2.7% faster productivity growth versus the pre-pandemic trend.
That is a monster number.
Luke walks through some back-of-the-napkin math involving AI, productivity, and GDP, concluding that we could see upwards of 15% GDP growth, resulting in an additional $16.5 trillion in economic output.
With this basis, Luke asks:
So, is $500 billion of hyperscaler AI capex next year “too much”?
No. It’s arguably too little.
The return on investment is staring us in the face.
Want the latest way to play it?
Luke highlights Cisco (CSCO), which dropped a blowout earnings report last week.
According to Luke:
Cisco itself is scrambling to expand supply because it expects AI orders to double in FY26.
For Luke’s official picks in Innovation Investor, click here to learn more about joining him.
If you’re still nervous about today’s market, consider “renting” it alongside Jonathan Rose
If the volatility, bearish headlines, and fear of giving back gains is weighing too heavily on you, remember – you don’t have to “own” this market as a long-term buy-and-hold investor…
You can rent it.
That’s the beauty of short-term, high-conviction trading. You’re not marrying a position. You’re capturing the surge, harvesting the profit, and stepping aside. And few in our industry do that better than veteran trader Jonathan Rose, editor of Advanced Notice.
Here are a few of his recent returns – and hold periods – to make the case for me:
- 209% in 13 days – LYFT
- 275% in 25 days – ETHA
- 700% in 15 days – MP
- 227% in 49 days – U
- 534% in 3 days – MP
These aren’t hypothetical backtests. They’re real trades Jonathan made by identifying the exact moments that institutional “smart money” piles into a stock – the moments he calls Profit Surges.
Last week, at his Profit Surge Event, Jonathan walked viewers through how his system finds these trades, how he manages risk, and how his approach can amplify the very same big-picture trends that Louis, Luke, and Eric Fry recommend.
You can catch the full replay of the event here. But a heads-up – we’re taking it down this evening, so this is last call.
Wrapping up…
Markets can flip from boom to gloom in an instant… market experts can be brilliant – yet wrong in their timing… and market tops only reveal themselves long after the fact.
That’s why we’re not trying to nail the top. We’re trying to remain grounded in what market history suggests is our best course of action – defining a plan, then anchoring our decisions to it.
So, what are you anchored to today? Your peak or your plan?
Have a good evening,
Jeff Remsburg
