The Stealth Bear Market is a GENERATIONAL Buying Opportunity

There are still a ton of important stocks that are in bare market territory as the market is dealing with this very stealthy correction or very stealthy bare market. Now, speaking of corrections, last week as at the time of time of this recording, the Nasdaq just avoided its third minus 10% correction of the year, closing in at - 9%, bouncing off the 200 day EMA. I want you guys to remember because the opportunities this this type of situation is what creates opportunities for the long term. When you see people that have great cost basis on their stocks, it's because they ended up buying on times like this and not selling. Resets are what lets the market go higher over time. The market cannot go higher without resetting. Whether you're talking about an a an index like the NASDAQ or the S&P 500 or you're talking about your favorite blue chip stocks, resets are what allows the market to go higher. Earnings expectations come in, they beat. The next earnings expectation comes in, they beat, and so on and so forth until they end up missing an earning season, and the market then resets and re-evaluates what the stock has to do to continue going higher. Now, we did go ahead and grade every single stock and their earnings that that have reported so far. Go back and watch the last video. But in this video, we're going to talk about what the hell happened to the stock market last week and more importantly, which stocks am I looking to buy now? Because in my opinion, the opportunities are starting to look fresh again and how to construct a portfolio from here depending on who you are and what your risk tolerance is. I told you guys, I promised you that I would be making this video on Sunday and here we are. Now, last week's performance in my portfolio was flat, up.13% for the week. But that is because I was holding puts since October 26th. This alert was sent out in the academy. The exact strike price and expiration. I bought puts on QQQ and bought puts on SPY expiring November 6th. Now, this wasn't based on any psychic ability. I even posted this publicly on X October 26th. I said that I expected QQQ to take out the FOMC low from September at least, if not the July FOMC low, back that up with stats, back that up with options flow as well. Follow me on X for free trading and finance content daily. But if you want to trade live with me every single day at market open, you want access to the swing trades, the portfolio hedge information, including the exact strike and expiration that I'm looking at, as well as long-term stock analysis and deep dives, make sure you join us at wop.com/thetraingtrader. Now, I ended up closing those puts for big profits. Helped the portfolio quite a bit, not in terms of making money, but in terms of saving my ass. And I will potentially open up a new set of hedges depending on what the market does in the coming weeks. So let's talk about what the market is what's expected for the market in the coming weeks. Now last week we had the FOMC and the Fed actually paused which was the expected outcome and the hike odds for December have come down considerably based on the market performance last week and based on the earnings performance as well. As I said the the earning season was not great. There were some stocks that I think absolutely killed earnings. VRT, SanDisk, and Microsoft in my opinion were all A's. Forinet and CRM did really well. Forinet to me, this one was an overreaction. And then Meta, Google, Intel, Service Now, and Amazon did not do great. If you want full detail into each of these, watch my last video here. But out of these ones, the one that I think is the most mispriced and the one that I actually did just start buying the dip on was Amazon. The NASDAQ avoided so far three minus 10% corrections in the same year. As if you look at QQQ from close to close even though intraday we did hit that 10 - 10% mark but close to close we are down - 9% sitting on the 200 day moving average or EMA actually. So what are the chances of a market bounce here? Let's talk about it. Well, I went ahead and looked at all the times that I can find that QQQ just tagged the 200 EMA. Since 2000, about 50% of the time, the 200 EMA held the line, like it was the actual support. Here's the more important part and the one that I think where I think we have an asymmetric opportunity. 83% of the time, the market or the NASDAQ was higher 6 months later. Now, if we combine this with the midterms and the midterm seasonality, I think this ends up becoming a super stat. Now, not only is the NASDAQ sitting at the 200 EMA, but it is almost minus 10%, and we do have stats on near misses. There have been 11 near misses since 2000 where the S&P 5 where the NASDAQ came within just a hair of minus 10% but didn't close - 10%. again 82% it is higher 12 months later. The median gain 12 months later is plus 18%. That's just the middle. Now breaking the 200 EMA is not a huge deal in and of itself. It really depends on what happens after breaking it. But if you look at March, we did end up closing below the 200 EMA and QQQ ran 25% in 3 months. But if you match this with the fact that the S&P 500 is green 100% of the time 12 months after midterms and almost 100% of the time for the NASDAQ, there was that period in 1986. Now, the NASDAQ did look a lot different. Now, the NASDAQ is full of companies that generate cash better than any company in stock market history. The NASDAQ does look a lot different, but if you do combine this dip with these stats here, it does set up an asymmetric opportunity in my opinion for the next 12 months. Now, in the short term, between the election day and the end of the year, this is actually a mixed bag. It resembles what the typical market stats are. Meaning there is there really isn't an edge between the the election day and between the end of the year. Between election day and end of and the end of the year, the S&P 500 is up 1.9%. All other years are 1.3% on average. The NASDAQ is up 1.7% during midterm years. actually worse than other years where the NASDAQ is up typically 3.1% from the period which is election day to the end of the year. Now, throw all of these stats out the window if you want, right? If you are just a long-term investor, look at this. The S&P 4 PE ratio right now is the cheapest that it has been since Liberation Day. This is very run-of-the-mill. The technology sector of the S&P 500 is at 19.5 forward PE, probably even less now since the companies that had already reported earnings because this is as of October 22nd, but we were sitting at over 30 just a few months ago. At the top of 2020, we were near 30. If you go back to the.com bubble, we were almost 50. So regardless of whether this is the bottom or whether you disagree with with my analysis, look at the companies that you want to buy and see if they are actually at a fair value or at a cheaper than fair value at the moment. Because these types of drops and this type of cost basis is what gives you the chance to build real wealth long term when you are buying stocks that are mispriced. Now let's start with Amazon. To me, that was mispriced. This was an overreaction after after earnings. Their AWS revenue came in at 46 billion plus 39% year-over-year. Beat expectations. Their operating margins came in at 13.9% versus 9.7% barely missed on revenue even though revenue is up 12% year-over-year. And if we take a look at Amazon on Alphascope, the thing that really hurt Amazon in the same way that it hurt uh Google as well as Meta is the negative free cash flows. Now, I happen to believe that this is just a temporary symptom of the AI spending. And if you take a look here in Financial Times, it is expected that by 2028, the hyperscalers will be back in positive free cash flows. And you can already tell based on what they're doing revenue-wise, gross profit-wise, if they stop spending or when they stop spending on AI and they deem the AI buildout is enough for now, their cash flows are going to be much higher than they than they were before they started spending on AI. And also there will come a point just like Microsoft which I gave it a grade of an A in terms of its earnings because Microsoft has already figured out how to make money from AI and they are not sacrificing their free cash flows for it. But this will be common among the hyperscalers in my opinion and this analysis here by Financial Times shows that by 2028 2029 2030 the hyperscalers will be generating cash flows like we've never seen before. AWS revenues right now are at 161 billion. This is more than, I think, 476 companies in the S&P 500. So, I want you to screenshot this. These aren't the only stocks that are there, but these are stocks, in my opinion, important stocks that are trading in bare market territory. Doesn't mean that every single one of these is a buy. And it doesn't mean that every single one of these will align with your portfolio goals, your risk tolerance, your time to retirement, uh, and your portfolio distribution, but it is a good idea of where to start from. And I want you to look these up in a tool like Alphascope, which in my opinion is the best tool for this type of thing. It is the most concise yet most detailed fundamental analysis that you can pull up very quickly on a specific company. And if you look at a company like app 111 the things that I look for here right forward PE is the forward PE cheap and is it cheaper than the current trailing PE for PE of 11 and if we look at app 11ven's historical PE historical PE app had a a period where it was trading in the negative because it did not have earnings. However, it is now reporting consistent positive earnings trading in between the 20s and really between the 20s and 50s. So, relative to its own PE of PE of 11 is insane. Price earnings growth the lower the better or the more undervalued of 21 that is just crazy. Return on invested capital usually elite companies are doing more than 20%. And app is doing 64%. 5-year revenue kagger 31% of compound annual growth rate on revenue and then I look to see if a company has positive free cash flows if it doesn't like Alphabet right now or Amazon or Meta there has to be a good reason for that earnings per share consistently going up gross profit margin this is elite at 88% net income consistently going up EBID consistently going up but one of the things that I I think one of the ways in which I think people misalign their portfolios is when they take a look at they don't take a look at a stock's beta. And I want you to to just sh search whatever stock you're interested in buying and type in beta in Google and see what the beta is. If you look at Apploven's beta, it's currently trading at around 2 and a half. Now, what does this mean? This means that apploven is 2 and 1/2 times as volatile as the general market. So a lot of times what people do is they overload on stocks that have a high beta like Apploven, like SoFi, like whatever. And they don't understand that that these types of port these types of stocks if you oversize on them in the interim, your portfolio can get wrecked because they trade at a much higher beta than the general market. The general market's beta is one. This is two and a half times more volatile than the general market. So even though applovening is great on paper, its beta is 2.5. So here's what I put together for you. Example portfolios by risk tolerance. Now your risk tolerance is going to be based on your lifestyle, your familial commitments, uh whether you are close to retirement or not because people that are younger will likely have much more pain tolerance and much more uh risk tolerance because they want to capture growth at the expense of high volatility. Whereas people who are closer to retirement want to capture uh stability and not be in a high volatility environment while still making, you know, decent gains closer to retirement, but they they aren't really trying to meddle in high beta names. Every single person in every portfolio is unique. A lot of times I'll get a question, is this stock a buy? Should I buy this stock? I have no idea. It really depends on you and your risk tolerance in your portfolio. I'm a big believer in if you cannot determine this, then you should not be stockpicking yet and you should just throw your money in the S&P 500 until you can figure out how to analyze a stock fundamentally. I just showed you it can be really easy if you use a stock if you use a tool like Alphascope and you determine whether that stock how that stock fits into your portfolio and not just yoloing on cheap high beta stocks because they're cheap or because you think that you're going to make a lot of money in the short term. So if you are on the conservative side of things and again this is just an example you don't have to follow follow this to the tea but it would be 60% in things like VU and QQQ or VU and SHD which are ETFs that track the indices 5% in growth names right whether it's an an app or whether it's a Vertive or a Bloom Energy and then 35% in fixed income whether it's VGIT or SGV TLT is a a little bit more volatile on the bond side, but SGV and VGIT are much less volatile than uh TLT. If you're on the moderate side of things, you might want to do 70% in ETFs, 15% in high growth stocks or high beta stocks, and 15% in bonds. If you're looking to capture growth, 65% in ETFs, 30% in growth stocks, and 5% in bonds. And if you're super aggressive, I mean, eat your heart out, but maybe 50% in ETFs and 50% in growth stocks. And I recommend you try to rebalance your portfolio about twice a year. Hopefully, you won't have to touch it a lot, but the more that you tinker with it, the more you're going to mess things up. And lucky for you, I'm doing a confident investor master class going over my process for how it is that I pick stocks, how I do fundamental analysis, what it is that I look for, how to construct a portfolio, how to line that up with basic technical analysis to set up buy points as well. And that's happening on Saturday, November 21st at 100 p.m. Eastern, absolutely free. So, make sure that you click the link in the description below if you want to reserve your seat. So, so far I only picked up some Amazon and I picked up QQQ on the drop as well. I am looking at Apploving looking at stocks like ARM. This is a very high growth stock. I do think that this one is not undervalued, but I think the story is so much of a monopoly that I'm definitely interested in ARM as well. Some of these I already own like Google and Broadcom. it's just a matter if I want to increase or decrease my position in them. And one thing from a market perspective that I am hyper aware of and I'm not just rushing to add everything all at once is that the S&P 500 still did not take out that September 16th FOMC low. And I do think that that is still a possibility and that would mean that QQ will likely take out July's FOMC low if that happens. Obviously, I'm not a fortune teller, but it is a possibility that's on the table. Best case scenario is the week of midterms that happens and that will then set up a potential monster rally, at least according to the stats between the midterms in the next 12 months. And I will hopefully try to get another midweek video for you guys detailing what moves I made in the in the portfolio already. But again, if you want everything in real time, including trading with me every single day, market open, you want access to the swings, shout out to those that hedge their portfolio with me, make sure that you subscribe wap.com/thetravelingtrader, and I'll see you in there. Subscribe to the channel, hit that notification bell, stay safe out there, traders. Peace.