Technical Update

Here is the Master Chart at present. I'm going to use SPY as there is a problem with the chart I typically use on Investing.com
 

SPX bounced down from the upper trend line. Now the question is, "How far does the SP500 dip?"  

Of course, we don't know. But, we can use technicals, history, and macro-conditions to make educated guesses. The FED and the European Central Bank seem hellbent on causing a recession in order to get inflation under control.

That being the case, I would not be surprised if we retest the 2022 lows or even dip lower. The three spots I have my eye on are the retest point, 3,200, and 3,000. Those are each levels of support. If the 2022 lows are hit, followed by an indicator candle/s, then 3,200 may be next. The same may be true of 3,200 to 3,000.

How does this information help? Well, there is no certainty, but I shall provide a couple examples. When I saw the 2022 low start heading up, I suspected that was a significant dip and a good time to buy. Conversely, as we are at the top and on the decline for a runup, some swing traders might be inclined to sell and long-term investors to hold cash.

I am not a market-timer per se, and I do some dollar-cost averaging. But I am saving cash at present and anticipating better buying points.

Having said all that, why did I buy near the top? I bought there because I liked the valuations regardless of where the SP500 was, and, as there is no certainty of where the market will go, I did not want to miss out on an opportunity to buy stocks I like at reduced valuations. I am not done buying shares of those stocks (in all likelihood), so I did not buy full positions (i.e., did not lump-sum).

Another question is how much is a recession priced into stocks, particularly growth stocks that are at historically low valuations? For instance, SE had a $40.67 low this year -- could it drop another 50% from there? Or is it so oversold that it won't drop as much proportionate to the SP500 as it did earlier this year? 

Whether it does or not, that does not change the fact that, in my opinion, SE is cheap (although it is a risky stock). SE trades at 2.34 EV/S on a forward basis 2.50 Price to Sales on a forward basis. While those prices are above "sector averages," those sectors are comprised of companies with nowhere near the growth potential as SE, and as such, SE will likely trade above "sector averages" for the foreseeable future. The book value is high, but SE is in the growth phase, and as such, book value is elevated. FINBOX gives SE a fair price of $71.90 based on their valuation models.

CRWD and SNOW were expensive when I added them to the Model Portfolio, but they were cheap from a historical perspective and reasonably priced, according to FINBOX.

Valuation is always debatable, and so I can only give my opinion on valuations. Many investors use the Buffet Intrinsic Value formula, but I don't find that particularly helpful when assessing growth stocks.

So, for now, my strategy is to hold cash and look for opportunities. Here are some stocks I'm watching and attractive entry points, IMO.

ASML                                $500        

FINBOX Fair Value           $558.83

NVDA                                $100-$125

FINBOX Fair Value           $153.65

NOW                                  $350-$375

FINBOX Fair Value           $453.61

The FINBOX fair values can change on a daily basis, so the FINBOX Fair Values I post are never "set in stone."

I want to add that my investing philosophy is to never invest more money than I can afford to lose. Financial hardship is tough, and losing one's finances in the stock market can be hellish. Financial professionals (which I am not) can be vital resources for managing risk!

Have a great weekend!

This website is created and authored by Marlin Sandlin and is published and provided for informational and entertainment purposes only and merely cites my own personal opinions.  I am not a financial advisor, and this website is not intended to constitute investment advice or provide specific advice or recommendations for any individual or on any specific security or investment product.  Any action you take upon the information you find on this website is strictly at your own risk.  This website may share links to articles and information which is interesting to me, but it is in no way an endorsement by me or by anyone associated with me.  The views reflected in the commentary are subject to change at any time without notice.   I may or may not hold investments in the companies or securities discussed on this website.

Marlin Sandlin owns shares of Crowdstrike (CRWD), Snowflake (SNOW), ASML Holding N.V. (ASML), and NVIDIA Corporation (NVDA).