The Stock Market Bottom is Near...

Stocks continue to get pummeled.

Last week, we explained how stocks were taking it on the chin.

Since then, it’s only gotten worse.

This past week, the S&P 500 fell 2.5%. That’s after falling 2.4% the week before.

The world’s most important index is now down more than 10% from its summer highs. It’s now trading at the lowest level since May.

The tech-heavy Nasdaq index isn’t faring any better. It’s dropped 11% from its July highs.

Naturally, this selloff has spooked a lot of investors.

But we must remember that the best buying opportunities occur when “there’s blood in the streets.”

So once again, we’re going to examine whether stocks are “screaming buy” here or if they’re  headed even lower from here.

But we want to first welcome new readers to The Discount Weekly. Each week, we look at the biggest issues facing traders and investors… and explain how they impact your portfolios.

Today, we’re going to assess the damage that’s been done to the stock market. We’re also going to say a few words on gold, which has held up well as of late.

Let’s start by sifting through the rumble….

The Leaders are Falling

Last Sunday, we explained how the “The Magnificent Seven” were holding up the entire stock market.

Once again, this term refers to Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA), and Meta Platforms (META).

For much of 2023, these stocks have carried the market.

Not only that, they’ve masked weakness below the surface. You see, your average stock has struggled this year.

We can see this many ways…

For one, the Invesco S&P 500 Equal Weight ETF (RSP) is down 5% on the year. Unlike the S&P 500, RSP gives equal weight to every stock in the S&P 500… giving us better idea of how most stocks are performing. 

The S&P 500, for comparison, is still up 7% on the year, even after the recent selloff. This is possible because mega cap tech stocks have an outsized impact on the performance of the S&P 500.

It Get’s Worse…

And that’s hardly the market’s only issue.

Just four out of the eleven sectors that make up the S&P 500 are green on the year. Real estate and utilities - the two worst performing sectors - both down more than 10% in 2023!

This is not what to see if you’re a stock market bull.

During healthy bull markets, many stocks across different industries perform well… rather than just a handful of giant stocks.

Unfortunately, the mega cap tech leaders are no longer being spared…

Take a look at this chart. It shows the performance of the NYSE Fang Plus Index. This index tracks the performance of ten large and mega-cap tech stocks, including Apple, Microsoft, Amazon.

This index fell 2.4% last week, which was the second week in a row that it’s closed in the red.

This is a major problem for several reasons.

Apple and Microsoft make up 46% of the technology sector, which is the most important sector for both the S&P 500 and Nasdaq. Meanwhile, Google and Meta account for 46% of the communications sector.

In other words, the year’s top performing sectors could soon be in real trouble.

If that happens, the stock market could be in major trouble.

The Silver Lining

The “silver lining here” is that the generals are usually the last stocks to get taken out.

In other words, the market could be closer to a bottom than most traders and investors realize. Of course, we want to see signs of a bottom forming before getting aggressively long stocks again. And we just don’t have those yet.

We’ll be actively discussing and notifying member in our FREE Telegram Channel when and if we are going long on the SP500.

This chart below shows the area we are watching on the SPY (ETF proxy for the SP500)…

Having said that, alternative assets like gold and bitcoin present interesting opportunities. Both have held up remarkably well as of late… and could be headed even higher from here.

To understand why, let’s take a look at gold’s long-term chart. We can see that it looks incredibly constructive on its monthly chart.

In fact, gold appears to be building out a massive cup and handle pattern. A confirmed breakout of this pattern would signal much, much higher prices for the yellow metal.

So, consider picking up some gold for the long haul.

It could act as a highly profitable hedge for the near and long term, should stocks remain under pressure.

Join us in our FREE Telegram Channel. We update our followers in real-time, with common sense analysis on the trades we are taking, currently in, and keeping our eye on. Common sense analysis that anyone, from beginner-to-advanced, can easily understand and take advantage of.

P.S. - If you are interested in LIVE Trading, Monday - Friday mornings, we have a LIVE Day Trading Room with over 50+ professionals, intermediates and beginners. Give it a test drive 7 Days for $7 here.

See You Next Sunday!