Record Hedge Fund De-Grossing Signals S&P 500 Rebound Into Midterms

Adam Khoo

Aggressive institutional liquidations have exhausted marginal sellers just as historical midterm seasonality and resilient corporate earnings set up the S&P 500 for a multi-month rally.

AI-assisted summary of US Stocks Crash? Midterm Election Rally Dead? — original source. Check the original for full context.

Source published: 2026-11-02

Key ideas

Severe sell-offs in speculative AI and semiconductor stocks represent an internal sector rotation into value and defensive sectors rather than a broad market crash, with the S&P 500 dipping only around 3%. (0:11)
Hedge funds executed a -7.8% de-grossing over the past week, marking the fastest rate of institutional position liquidations in a decade—a historical bottoming signal that has consistently preceded market reversals. (17:44)
The S&P 500 trades at an attractive 18.7x forward P/E, falling below its 5-year (19.8x) and 10-year (19.1x) averages and well beneath its 22x forward multiple at the start of the year. (11:09)
Historical midterm election seasonality shows the S&P 500 generating average gains of 8.1% over the subsequent three months (95% win rate) and 22% over twelve months (100% win rate). (22:42)
Comparing the AI expansion to the Dot-Com bubble reveals a younger cycle (3.9 vs. 5.3 years) with modest Nasdaq gains (137% vs. 1,000%) and reasonable market multiples compared to late-1990s extremes. (25:02)

Detailed notes

## Background Published on YouTube by investor and educator Adam Khoo on November 2, 2026, this video examines whether steep declines in speculative AI stocks and aggressive hedge fund de-grossing signal an impending market crash or the onset of a classic midterm election rally. Khoo breaks down historical post-midterm S&P 500 performance, institutional position unwinding, and whether the ongoing artificial intelligence cycle resembles the Dot-Com bubble.

## TL;DR Adam Khoo analyzes the sharp sell-off in AI and semiconductor equities, explaining that the broader S&P 500's modest ~3% dip reflects healthy sector rotation into defensive and value stocks rather than a systemic crash. He presents five core reasons to remain bullish, emphasizing that corporate earnings growth remains robust, forward index valuations sit below multi-year averages, and severe hedge fund de-grossing historically signals seller exhaustion and cycle bottoms. Backed by seasonal midterm election statistics that boast overwhelmingly positive forward returns and a comparative valuation study showing today's AI leaders trading far cheaper than Dot-Com era darlings like Cisco, Khoo concludes that significant upward runway remains ahead.

## Atmosphere & style The presentation carries an energetic, reassuring, and pedagogical tone, characterized by Khoo's direct, pragmatic speaking style and visual chart breakdowns. Rather than succumbing to sensationalist market headlines, the narrative methodically dismantles retail investor fear by contrasting short-term portfolio pain against hard macroeconomic and valuation data. The mood transitions from validating viewers' anxieties over violent tech pullbacks into an empowering, data-driven thesis on patience, historical probability, and disciplined risk management.

## Bulletin - [00:11](https://www.youtube.com/watch?v=oq3B28tS6c4&t=11s) Severe sell-offs in speculative AI and semiconductor stocks represent an internal sector rotation into value and defensive sectors rather than a broad market crash, with the S&P 500 dipping only around 3%. - [17:44](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1064s) Hedge funds executed a -7.8% de-grossing over the past week, marking the fastest rate of institutional position liquidations in a decade—a historical bottoming signal that has consistently preceded market reversals. - [11:09](https://www.youtube.com/watch?v=oq3B28tS6c4&t=669s) The S&P 500 trades at an attractive 18.7x forward P/E, falling below its 5-year (19.8x) and 10-year (19.1x) averages and well beneath its 22x forward multiple at the start of the year. - [22:42](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1362s) Historical midterm election seasonality shows the S&P 500 generating average gains of 8.1% over the subsequent three months (95% win rate) and 22% over twelve months (100% win rate). - [25:02](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1502s) Comparing the AI expansion to the Dot-Com bubble reveals a younger cycle (3.9 vs. 5.3 years) with modest Nasdaq gains (137% vs. 1,000%) and reasonable market multiples compared to late-1990s extremes.

## Key takeaways - [00:11](https://www.youtube.com/watch?v=oq3B28tS6c4&t=11s) Recent steep plunges of 30% to 50% in names like Intel, Micron, SanDisk, and Iris Energy reflect narrow tech pain rather than an index-wide bear market. - [02:32](https://www.youtube.com/watch?v=oq3B28tS6c4&t=152s) Institutional capital is actively rotating into lagging sectors—including financials, healthcare, industrials, and defensives—broadening market participation in a healthy bull market structure. - [04:58](https://www.youtube.com/watch?v=oq3B28tS6c4&t=298s) Technical moving averages on the S&P 500 remain strongly bullish, with downside risk likely capped at the 716 support level, which would represent roughly an 8% peak-to-trough pullback. - [07:56](https://www.youtube.com/watch?v=oq3B28tS6c4&t=476s) Five structural pillars support continued equity upside: solid corporate fundamentals, reasonable valuations, completed hedge fund de-grossing, early-stage AI cycle adoption, and favorable midterm seasonality. - [11:09](https://www.youtube.com/watch?v=oq3B28tS6c4&t=669s) Heavy capital expenditures by hyperscalers represent growth investments that expand long-term competitive moats and profitability rather than reckless bubble spending. - [13:37](https://www.youtube.com/watch?v=oq3B28tS6c4&t=817s) Q3 earnings momentum is broadening across the market, with non-Magnificent 7 companies delivering 32% earnings growth compared to 22% from the Magnificent 7. - [17:44](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1064s) Institutional selling exhaustion following extreme hedge fund de-grossing events historically removes marginal sellers, setting up powerful forward returns over 1- to 6-month horizons. - [20:17](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1217s) Traders are advised against buying long call options due to theta decay and volatility crush, favoring net-credit option strategies and strict capital risk limits instead. - [22:42](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1362s) Post-midterm election performance historically delivers exceptional reliability for equities, averaging 16.4% over 6 months and 22% over 12 months regardless of political party outcome. - [25:02](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1502s) The current AI cycle has delivered only 13% of the total index run experienced during the Dot-Com bubble, indicating significant potential runway remaining. - [27:30](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1650s) Nvidia trades at a modest forward P/E of around 17x to 20x, contrasting sharply with Dot-Com era leader Cisco Systems, which traded at an extreme 131x forward P/E prior to its bubble burst.

## Detailed walkthrough ### [00:11](https://www.youtube.com/watch?v=oq3B28tS6c4&t=11s) AI Stock Sell-Off vs. S&P 500 Reality

Recent trading sessions, particularly the end of the previous week following earnings reports from Alphabet and Amazon, felt like a devastating market crash to retail investors heavily weighted toward artificial intelligence names and hyperscalers. High-profile semiconductor and tech stocks experienced sharp one-day plunges: Micron dropped 5.3%, AMD plummeted 10.88%, Intel crashed 28% in a single day post-earnings, and SanDisk slid 13.47%. Hyperscalers also took hits on Friday, with Alphabet slipping 1.4% and Meta down 1.53%.

From their previous highs, the pullbacks appear severe: SanDisk, Intel, and Iris Energy (IREN) have each plunged roughly 50%, Micron is down 30%, and both Meta and Alphabet have surrendered 30% from their peaks. Adam Khoo observes: “So if you are mostly invested in these stocks, which many retail traders are, you would think it's a bare market. It's a stock market crash.” However, the broader S&P 500 index barely budged, shedding only around 3%. The capital leaving these names did not vanish from the market; instead, it rotated straight into traditionally defensive and value-oriented sectors, including financials, healthcare, industrials, and consumer defensives, all of which closed firmly green on Friday.

- Friday performance: Micron (-5.3%), AMD (-10.88%), Intel (-28%), SanDisk (-13.47%), Alphabet (-1.4%), Meta (-1.53%) - Peak drawdowns: SanDisk (-50%), Micron (-30%), Intel (-50%), Iris Energy (-50%), Alphabet (-30%), Meta (-30%) - Overall S&P 500 drawdown: only ~3%

---

[02:32](https://www.youtube.com/watch?v=oq3B28tS6c4&t=152s) The Anti-Bubble Rotation and Market Broadening

Adam explains that this dynamic represents internal rotation rather than a widespread index crash. Re-referencing his August thesis on the "anti-bubble mania," he emphasizes that money rotates between sectors in stages rather than all at once. The AI revolution is not dead, nor has the AI boom finished; instead, periodic rebalancing takes place. Over the preceding three years, the vast majority of index gains were concentrated in semiconductors, hyperscalers, and AI stocks, leaving healthcare, industrials, and financials lagging far behind.

To allow these underperforming sectors to catch up, institutional players trim profits from winning AI positions and reallocate into non-AI stocks. Once those lagging sectors normalize, money eventually flows back into AI names, setting up a recurring rhythm of rotation and consolidation across the next few months to two years. Adam remarks: “Overall the market is broadening and it's a good sign. is a very healthy uh bull market just rotation within the bull market that seems like a bare market if you're purely invested in the AI part of it.”

```mermaid flowchart TD accTitle: Institutional Market Rotation Cycle accDescr: Diagram illustrating how institutional capital rotates between AI leaders and non-AI lagging sectors over time.

subgraph Phase1["1. Capital Reallocation"] A["Institutional Investors Take Profit"] --> B["Sell AI & Hyperscalers<br/>(Semis, Big Tech)"] B --> C["Capital Rotates to Non-AI<br/>(Financials, Healthcare, Industrials)"] end

subgraph Phase2["2. Market Expansion"] C --> D["Lagging Sectors Rally & Catch Up"] D --> E["Market Breadth Improves"] end

subgraph Phase3["3. Next Wave"] E --> F["AI Plays Reset & Run Again"] F --> A end ```

---

[04:58](https://www.youtube.com/watch?v=oq3B28tS6c4&t=298s) Technical Analysis and S&P 500 Support Levels

Examining the S&P 500 ETF chart, the drawdown from the recent high amounts to less than 4%—roughly 3.something percent—which does not qualify as an official correction (10% or more) or a bear market (20% or more), but merely a standard pullback. Structurally, the major daily and intermediate uptrend remains intact despite choppy price action: the 20-day exponential moving average (EMA) is above the 40-day EMA, and the 50-day simple moving average (SMA) trades well above the 150-day and 200-day SMAs, with all moving averages sloping upward.

Adam highlights key support levels to watch if short-term weakness persists. The immediate support area near recent swing lows has been slightly breached; a potential double-bottom bounce here could trigger a "bear trap" reversal, a concept he credits to his friend Alson Chew. Should that floor fail at the 749 level, the next significant structural support rests at the 716 swing low. A drop to 716 would mark approximately an 8% decline from the peak—still shy of an official 10% correction. Adam projects: “Now, my guess is that again, I can't tell you whether it's going to break this support, but if it does, I don't think we're going lower than 716, which means I think at the very most we see an 8% correction and we're going to bottom somewhere here and then, hallelujah, all the way to the end and to the next year.”

- Moving averages: 20 EMA > 40 EMA (short-term uptrend intact); 50 SMA > 150 SMA & 200 SMA (sloping up) - Critical price levels: First support / recent swing low (~749 area); major swing low support at 716 - Downside extent to 716: ~8% decline from the high

---

[07:56](https://www.youtube.com/watch?v=oq3B28tS6c4&t=476s) Five Reasons to Stay Bullish into the Midterm Elections

Adam outlines five distinct macroeconomic, technical, and seasonal pillars that keep him optimistic about equities over the upcoming three to twelve months:

1. **Company Fundamentals:** Corporate earnings and operational health across the S&P 500 remain robust. 2. **Valuations:** The market is not overly expensive and is actually trading cheaper than it was at the start of the year. 3. **Institutional Positioning:** Hedge funds aggressively de-grossed and slashed leverage last week, effectively washing out excess positioning and completing the bulk of forced selling. 4. **AI Life Cycle:** The AI secular trend is in its foundational phase, displaying metrics far removed from a classic dot-com-style bubble. 5. **Midterm Election Tailwinds:** The US midterm elections on November 3rd serve as a major historical catalyst. He notes: “And historically, what happens after the midterm elections for the next 3 months, 6 months, 12 months, historically, it's been one of the most bullish times of the market.”

---

[09:09](https://www.youtube.com/watch?v=oq3B28tS6c4&t=549s) Monthly Sector Performance and Portfolio Resilience

Monthly sector tracking reveals stark divergence. During October, technology fell 8.56% and communication services dropped 12.25%, driven by sell-offs in Meta and Alphabet. Concurrently, capital shifted into defensive and real-economy sectors:

| Sector | October Performance | Year-to-Date Performance | |:--- |:--- |:--- | | **Technology** | -8.56% | +19% | | **Communication Services** | -12.25% | Lagging / Negative | | **Consumer Defensives** | +11% | +14% | | **Energy** | +10% | Positive | | **Healthcare** | +9% | +15% | | **Utilities** | +8% | Positive | | **Real Estate** | +4% | Positive | | **Cyclicals** | +3.88% | Positive | | **Materials** | — | +6% |

Adam shares that his personal portfolio was affected by October's tech rotation, slipping from a year-to-date gain of 25% down to 18.7%. Nevertheless, he remains ahead of the broader S&P 500's year-to-date return of 10% to 11%. His heavy weighting in healthcare has helped anchor performance, balancing out holdings in communication services like Alphabet and Meta whose underlying business fundamentals remain fundamentally sound.

[11:09](https://www.youtube.com/watch?v=oq3B28tS6c4&t=669s) Fundamental Valuation: S&P 500 Is Not in a Bubble

Adam Khoo addresses the recent pullback, arguing that the only real driver behind the drop is short-term sentiment panicking over elevated capital expenditures (capex). To him, heavy spending by tech giants is actually positive because it represents growth capex that will fuel higher future revenues, wider profit margins, and stronger economic moats over the long run. Rather than fearing capex, he uses dips to build positions. Pointing to the hard data so viewers can make up their own minds, Khoo notes that the forward price-to-earnings (P/E) ratio for the S&P 500 sits at 18.7 times—well below its 5-year average of 19.8 times, below its 10-year average of 19.1 times, and considerably cheaper than the 22 times forward P/E observed at the start of the year.

Looking beneath index-level ratios into intrinsic valuation calculations for all 500 companies via Stock Oracle, Khoo emphasizes that the overall market is nowhere near bubble territory. About 27% of S&P components trade within ±10% of their intrinsic value, roughly 30% to 31% are undervalued, and the remaining 40% are overvalued. For disciplined value-momentum investors, this environment provides plenty of high-quality, wide-moat businesses trading at or below fair value.

- Forward P/E of the S&P 500 is 18.7x versus its 5-year average of 19.8x and 10-year average of 19.1x. - Forward valuation has contracted from 22x at the beginning of the year. - S&P 500 valuation distribution: ~27% fairly priced, ~30–31% undervalued, ~40% overvalued.

> “So, in other words, based on a forward PE, the S&P is cheaper today than the last 5 to 10 year average. and is cheaper today than it was at the start of the year where it was 22 times forward.” — Adam Khoo

---

[13:37](https://www.youtube.com/watch?v=oq3B28tS6c4&t=817s) Earnings Growth and the AI Productivity Shift

Khoo reviews Q3 earnings results, pointing out that companies reporting so far show an aggregate earnings growth rate of 30.2%, outpacing the 29% consensus expectation set at the end of September. While sharp sell-offs in individual names—such as Fortinet plunging roughly 25% to 27% post-earnings—can be painful, Khoo reminds investors that Fortinet is still up around 70% year-to-date. In his framework, price declines in companies with deteriorating fundamentals are cause for concern, but when high-quality stocks drop despite strong business performance, it creates a clear buying opportunity.

Crucially, earnings projections for the next 12 months continue to rise while index prices have mostly traded sideways, leaving substantial upside room for price to catch up with fundamentals. The market rally is also broadening beyond the "Magnificent 7" (Amazon, Google, Meta, Nvidia, and peers). Previously, the Magnificent 7 drove 33% earnings growth while the remaining 493 stocks generated 27%; in the current earnings season, the Magnificent 7 grew earnings by 22%, whereas non-Mag 7 sectors (such as industrials and financials) accelerated to 32% growth. Furthermore, corporate net profit margins have expanded to 17%, up significantly compared to 2024 levels, demonstrating tangible productivity and cost-saving gains driven by enterprise AI adoption.

| Metric / Category | Prior Period / Mag 7 Comparison | Current Q3 Earnings Season | |:--- |:--- |:--- | | **S&P 500 Aggregate Earnings Growth** | 29.0% (September expectations) | 30.2% (actual reported) | | **Magnificent 7 Earnings Growth** | 33% | 22% | | **S&P 493 (Rest of Index) Growth** | 27% | 32% | | **Corporate Net Profit Margin** | Lower baseline (2024 level) | 17.0% |

> “See, when a when a stock price drops because the fundamentals suck, then I get worried. Oh Right. But if the stock price drops, when the fundamentals are very good, I go, who the hell cares?” — Adam Khoo

---

[17:44](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1064s) Hedge Fund Degrossing: Historical Bottoming Signal

The second reason Khoo remains bullish is institutional market positioning. Facing one of their toughest years on record, hedge funds crowded aggressively into speculative AI and semiconductor plays like Iris Energy (IREN), SanDisk (SNDK), and Micron (MU)—names Khoo personally avoids due to high risk. As those volatile stocks crashed 50% from their peaks, bleeding hedge funds were forced into emergency loss-cutting, triggering aggressive "degrossing." Despite the S&P 500 declining by only 3%, hedge fund positioning saw a -7.8% degrossing over the past week—the fastest rate of position liquidations recorded in a decade.

Historical precedent shows that hedge fund degrossing events exceeding 5% (such as past episodes of 5.8%, 5.9%, 6.1%, 6.6%, 7.1%, and 8.0%) have reliably coincided with major weekly swing lows on the S&P 500. When forced institutional selling exhausts itself, there is little supply left to push prices lower, allowing modest buying volume to ignite strong upward reversals. Past episodes reveal consistent gains of 6% to 12% across one-month, three-month, and six-month forward windows.

```mermaid flowchart TD accTitle: Hedge Fund Degrossing Mechanism to Market Reversal accDescr: Sequence showing how hedge fund crowding into speculative AI names forces massive liquidation, leading to seller exhaustion and market bottoms.

subgraph Crowding ["1. Overleveraged Positioning"] A["Hedge funds crowd into speculative AI names"] --> B["High-beta AI stocks drop ~50% from peaks"] end

subgraph Liquidation ["2. Forced Degrossing"] B --> C["Massive margin pain & forced stop-outs"] C --> D["Institutional degrossing hits -7.8% (10-yr extreme)"] end

subgraph Exhaustion ["3. Supply Vacuum & Rally"] D --> E["Seller exhaustion: marginal sellers eliminated"] E --> F["S&P 500 forms cyclical bottom & rebounds"] end ```

- Hedge funds experienced a -7.8% degrossing rate over the week, marking the sharpest liquidation in 10 years. - All historical instances of >5% hedge fund degrossing coincided with or immediately preceded durable S&P 500 lows. - Subsequent forward performance across historical occurrences showed unanimous positive returns across 1-month, 3-month, and 6-month horizons.

> “Now, after they sell everything, what happened? There's no more selling because all the selling has been done. And there's no more selling, then the market is unlikely to go very much lower, right? And a little bit more buying will push the market higher.” — Adam Khoo

---

[20:17](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1217s) Risk Management and Why Buying Call Options Is a "Losing Game"

Despite the high historical probability of a bottom, Khoo warns traders against being reckless. Having navigated the financial markets for nearly three decades, he cautions that anything can happen and guarantees do not exist. Traders looking to enter must wait for confirming candlestick patterns, always place a hard stop-loss, and keep per-trade risk capped at a small percentage of total account capital to avoid catastrophic drawdowns.

Khoo strongly advises against buying outright long call options or long LEAPs when trading bullish setups. He cites Tom Sosnoff, the creator of Thinkorswim and Tastytrade, who recently stated in an interview that he has not purchased a single call option in 25 years. Outright long calls are structurally vulnerable because rapid time decay (theta) and volatility crush can wipe out a position even if the trader correctly guesses market direction. Instead, Khoo and his co-instructor Bangfan favor defined-risk net-credit strategies, such as bullish synthetic spreads, cash-secured puts, and credit spreads. He concludes by teasing these tactics for the upcoming "Black Market X" live options event in November, celebrating Piranha Profits' 10th anniversary.

> “Tom Sosnoff, who is the legendary creator of Think or Swim and Tasty Trade, he just did an interview. He said, 'I have not bought a call option in 25 years.'” — Adam Khoo

[22:42](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1362s) Historical Midterm Election Performance and Seasonality

Adam Khoo revisits the historical track record following aggressive hedge fund de-grossing events and the midterm elections. Although the sample size is small and not statistically definitive, he points out that the market has moved higher six out of six times following such massive de-grossing episodes. Looking at previous midterm election cycles dating back through history, Khoo reviews how the S&P 500 performs over three-month, six-month, and twelve-month windows starting in November. Across almost every past midterm cycle, post-election returns have been overwhelmingly positive, with only one outlier: “These were all the previous midterm election years and you can see what happened from November to 3 months later which will be November, December, January.” He notes that 2018 was the single spoiler that delivered negative returns.

Beyond that exception, the historical averages remain striking. Across the three-month period from November through January, the market yields an average gain of 8.1% with a 95% win rate. Extending that view to six months out from November, the average gain rises to 16.4% with a 100% win rate in past samples. At twelve months out, the average gain hits 22%, again boasting a 100% historical win rate. Khoo cautions that there are no guarantees and this cycle could theoretically repeat 2018, but he stresses that the statistical odds heavily favor investors regardless of which political party prevails. Polymarket betting odds place a 72% probability on Democrats sweeping both the House of Representatives and the Senate, but Khoo insists election outcomes ultimately do not matter to the rally. Under typical midterm seasonality, the market often experiences a sharp dip or crash bottoming in October or early November, followed by an aggressive push upward into year-end—interrupted only briefly by a modest pullback in December.

- **3-Month Window (Nov–Jan):** 8.1% average gain, 95% positive win rate. - **6-Month Window:** 16.4% average return, 100% positive win rate historically. - **12-Month Window:** 22% average return, 100% positive win rate historically. - **Polymarket Odds:** 72% chance of a Democratic sweep across the House and Senate.

[25:02](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1502s) Comparing the AI Boom to the Dot-Com Bubble: Duration and Valuation

Addressing whether severe pullbacks of 20%, 30%, or 50% across AI-related names signal the end of the AI revolution trade, Khoo firmly rejects the panic. He argues against the crash thesis on two specific fundamental fronts: duration and valuation. Comparing the current AI expansion (shown in red) to the Dot-Com bubble of the late 1990s (shown in blue)—an era he lived and traded through as a young man in his early twenties—he demonstrates that the current cycle is comparatively young. Counting from the November 2022 release of ChatGPT, the current AI boom stands at approximately 3.9 years, whereas the Dot-Com expansion ran for 5.3 years from its start in 1994. If the AI wave matches that lifespan, it still possesses at least 1.4 years of runway.

The gap in overall gains is even more pronounced. Over its 5.3-year run, the Dot-Com-era Nasdaq surged 1,000%, whereas the Nasdaq 100 in the current AI boom has climbed 137%. As Khoo calculates: “So is it's only 10. In other words, the AI boom is only 13% of the com boom. So we are nowhere near where the dot boom went, right?” He contrasts the bubble valuations of the late 1990s—when companies traded at absurd, unsustainable multiples—with today's landscape. The major constituents of the S&P 500 and the Nasdaq are backed by real earnings and remain reasonably valued or even cheap on a fundamental basis. Even if the current market captures only half of the Dot-Com era’s total momentum, Khoo believes significant upside remains ahead.

[27:30](https://www.youtube.com/watch?v=oq3B28tS6c4&t=1650s) Cisco vs. Nvidia: Valuation Reality and Outro

Khoo turns to the common market comparison between Nvidia—the undisputed poster boy of the AI revolution—and Cisco Systems, the bellwether of the Dot-Com era. While critics warn that Nvidia is destined to collapse just as Cisco did when the tech bubble popped, Khoo examines the relative trajectories and finds little equivalence at present. By year 3.9 of the Dot-Com cycle, Cisco had gained roughly 700%, while Nvidia has risen approximately 1,000% over the equivalent period. However, Cisco did not peak there; it continued surging until it reached a massive 4,200% overall return from its starting point before finally crashing.

The disparity in valuation between the two market leaders is stark. At its euphoric peak before crashing, Cisco traded at an eye-watering forward price-to-earnings (P/E) ratio of 131 times. In contrast, Khoo highlights that Nvidia trades at a forward P/E of roughly 17 to 20 times earnings: “Cisco before it crashed what was the forward PE the forward PE ratio of Cisco was 131 times PE it was freaking insane. 131 times 4 P. Okay. Nvidia's forward PE today is only 17 times.” By this comparison, Nvidia remains remarkably inexpensive relative to Cisco at the height of the bubble. If Nvidia were ever to match Cisco's peak run, it could theoretically offer another 400% gain from current levels, giving long-term investors serious food for thought.

Khoo wraps up the presentation by encouraging viewers to subscribe and ring the notification bell, and invites them to attend "Black Market X," an upcoming free webinar series in November celebrating their 10-year anniversary and covering decade-long market-beating strategies. He directs viewers to PiranhaProfits.com for investment and trading courses and to WealthAcademyGlobal.com for live seminars, signing off with his signature catchphrase: “This is Adam Khoo and may the markets be with you!”

```mermaid flowchart TD accTitle: Cisco Dot-Com Peak vs Nvidia AI Boom Valuation Comparison accDescr: Visual flowchart comparing peak Cisco valuation and performance during the dot-com era against Nvidia in the current AI cycle.

subgraph DotCom["Dot-Com Era: Cisco Systems"] C1["3.9-Year Gain: ~700%"] --> C2["Cycle Peak Gain: ~4,200%"] C2 --> C3["Forward P/E at Peak: 131x"] C3 --> C4["Eventual Bubble Crash"] end

subgraph AIBoom["AI Boom Era: Nvidia"] N1["3.9-Year Gain: ~1,000%"] --> N2["Current Forward P/E: ~17x"] N2 --> N3["Current State: Far Cheaper than Cisco Peak"] N3 --> N4["Theoretical Upside Potential: Up to 400%+"] end ```

## Mentioned Adam Khoo, Alphabet, Amazon, AMD, Intel, Micron, Meta, SanDisk, Iris Energy (IREN), S&P 500, Alson Chew, Stock Oracle, Fortinet, Nvidia, Magnificent 7, Tom Sosnoff, Thinkorswim, Tastytrade, Bangfan, Piranha Profits, Polymarket, ChatGPT, Cisco Systems, Nasdaq 100, Wealth Academy

## Video description Hedge funds just dumped stocks faster than they did in March 2020. AI related stocks like IREN, SNDK, INTC down over 50%. Americans vote in the midterm elections tomorrow. So is a US stock market crash coming, or is the famous midterm election rally about to begin?

In this video, I walk you through the real math. We look at how the S&P 500 has performed after every midterm election since 1950, what history says happens after hedge funds de-gross this aggressively, and whether the AI boom really looks like the Dot Com bubble everyone is warning you about.

======================== Stock Investing & Trading insights by Adam Khoo will show you profitable trading and investment opportunities in today's stock markets.

These are essential strategies for stock traders and investors who want to improve their investment and trading performance.

Adam Khoo is a professional stock investor and options trader and the best-selling author of 16 books including 'Winning the Game of Stocks" and "Profit from the Panic". Thousands of students have profited from his sharp investment insights into the world of stock market investing and trading. ===================== Sign up for our courses/mentorship programs 📗 Value Momentum Investing: http://bit.ly/4mqrEVP 📙 Options Waverider™: http://bit.ly/4c5xyrR 📘 Price Action Manipulation™ (Trading): http://bit.ly/48FUAmQ 📕 Income Investing™ (Dividends): http://bit.ly/3Ow8CRj

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[Source](https://www.youtube.com/watch?v=oq3B28tS6c4)

中文简报

对冲基金去杠杆降仓规模创纪录，预示标普500指数将在中期选举前反弹机构的激进平仓已耗尽边际抛盘，而历史上的中期选举季节性表现与坚挺的企业财报，正推动标普500指数迎来长达数月的反弹行情。 Adam Khoo分析了AI与半导体板块的剧烈抛售，指出标普500指数约3%的温和回调反映了资金向防御型和价值型股票的良性板块轮动，而非系统性崩盘。他提出了保持看涨的五大核心理由，强调企业盈利增长依然强劲，主要指数的前瞻估值低于多年平均水平，且对冲基金深度去总杠杆降仓在历史上往往预示着抛压耗尽和周期触底。结合中期选举后具有极高正收益概率的季节性统计数据，以及当前AI领头羊估值远低于思科等互联网泡沫时期宠儿的对比分析，Khoo总结认为后市仍有充裕的上涨空间。投机性AI和半导体股票的惨烈抛售，代表着资金向价值与防御板块的内部轮动，而非全市场崩溃，标普500指数仅下跌了3%左右。 (0:11) 对冲基金在过去一周执行了-7.8%的去总杠杆降仓，创下十年来机构持仓清算速度的最快纪录——这一历史筑底信号此前曾多次先于市场反转出现。 (17:44) 标普500指数的前瞻市盈率处于具有吸引力的18.7倍，不仅低于其5年均值（19.8倍）和10年均值（19.1倍），也远低于年初22倍的前瞻估值倍数。 (11:09) 历史中期选举季节性规律显示，标普500指数在随后三个月内的平均涨幅达8.1%（胜率95%），十二个月内的平均涨幅达22%（胜率100%）。 (22:42) 将当前的AI扩张周期与互联网泡沫对比可以发现，当前周期更年轻（3.9年对比5.3年），纳斯达克指数涨幅相对温和（137%对比1000%），且市场估值倍数相较于1990年代末的极端水平仍属合理。 (25:02)

Reading summary

Adam Khoo argues that recent sharp drops in high-beta artificial intelligence stocks represent an internal sector rotation and institutional de-grossing rather than an overarching market crash. Supported by reasonable valuations, earnings expansion, and historical post-midterm seasonality, he projects that the broader equity bull market remains structurally intact. Anti-Bubble Rotation vs. Broad Index Crash (0:11) Retail portfolios heavily concentrated in AI and semiconductor names experienced severe drawdowns, including single-day falls such as Intel's 28% drop and AMD's 10.88% plunge, alongside peak-to-trough collapses around 50% for names like SanDisk and Iris Energy. Despite this concentrated volatility, the S&P 500 index pulled back only around 3%, falling short of an official 10% correction. Khoo interprets this divergence as an 'anti-bubble' market broadening rather than capital fleeing equities. Institutional investors took profits from semiconductor and hyperscaler winners to fund lagging, value-oriented sectors. During October, technology and communication services fell 8.56% and 12.25% respectively, while consumer defensives (+11%), energy (+10%), and healthcare (+9%) advanced. Technical Structure and Institutional De-grossing Bottom (4:58) From a technical standpoint, the S&P 500 uptrend remains intact with the 20-day EMA above the 40-day EMA and rising longer-term moving averages. Khoo identifies immediate support around the 749 swing low, with secondary structural support at 716 representing a maximum drawdown of roughly 8% from peak levels. Simultaneously, institutional positioning flashed a historical bottoming signal. Hedge funds crowded into speculative AI plays faced heavy stop-outs, driving a -7.8% weekly de-grossing rate—the fastest liquidation in a decade. Past de-grossing events exceeding 5% consistently marked cyclical market bottoms, as exhausted institutional selling pressure left little supply to suppress prices. Fundamental Valuations and Earnings Diversification (11:09) Khoo dismisses bubble warnings by noting that the S&P 500 forward price-to-earnings ratio sits at 18.7x, below its 5-year (19.8x) and 10-year (19.1x) averages and cheaper than its 22x level at the start of the year. According to Stock Oracle metrics cited, roughly 57% to 58% of index components trade at or below intrinsic fair value, with only 40% overvalued. Corporate earnings fundamentals also continue to accelerate. Reported Q3 aggregate earnings grew 30.2%, outpacing the 29% consensus expectation. Earnings performance has broadened beyond the 'Magnificent 7': non-Mag 7 constituents expanded earnings by 32% compared to 22% for the mega-caps, while corporate net profit margins widened to 17% due to AI-driven enterprise efficiency. Historical Midterm Tailwinds and Dot-Com Comparisons (22:42) Khoo highlights historical midterm election cycles as a powerful seasonal catalyst, noting that the S&P 500 has averaged an 8.1% gain over the subsequent three months (95% win rate), 16.4% over six months (100% win rate), and 22% over twelve months (100% win rate), with 2018 as the lone historical outlier. Addressing fears of an imminent dot-com collapse, Khoo points out that the current AI wave has advanced for roughly 3.9 years with a 137% Nasdaq gain, compared to the 1990s tech cycle lasting 5.3 years and delivering 1,000% gains. Furthermore, while dot-com bellwether Cisco reached a forward P/E of 131x before crashing, market leader Nvidia trades around a 17x forward P/E, which Khoo views as reflecting real earnings backing rather than speculative excess. While Khoo sees historical odds and fundamentals strongly favoring continued upside into next year, he acknowledges that past patterns do not guarantee future outcomes. To mitigate risks from potential volatility, he advises maintaining stop-losses and using defined-risk option spreads rather than speculative long call options.

精炼阅读摘要

Adam Khoo 指出，近期人工智能与半导体板块的剧烈下挫并非美股崩盘或 AI 繁荣的终结，而是牛市内部健康的资本轮动；在标普 500 估值收缩、企业盈利超预期、对冲基金极端去杠杆以及历史性中期选举周期的支撑下，美股仍具备充足的上行动力。 AI抛售与牛市内部的健康板块轮动 (0:11) 在 Alphabet 与亚马逊公布财报后，科技股遭遇集中抛售，重仓 AI 与超大规模计算企业的散户面临剧烈冲击。单日表现中，美光下跌 5.3%，AMD 下挫 10.88%，英特尔暴跌 28%，SanDisk 跌 13.47%，Meta 与 Alphabet 也分别下滑约 1.5%。自前期高点计算，SanDisk、英特尔及 Iris Energy 跌幅已达约 50%，美光、Meta 和 Alphabet 亦自高位回撤 30%。然而，标普 500 指数同期仅下跌约 3%。 Khoo 强调，流出 AI 龙头的资金并未离开市场，而是流向了金融、医疗、工业和必需消费品等防守与价值板块。10 月份科技板块下跌 8.56%、通信服务下跌 12.25%，但防守消费品上涨 11%，医疗与能源分别上涨 9% 和 10%。他将这种现象定义为“反泡沫”阶段的周期性再平衡：机构投资者通过兑现过去三年领涨的半导体利润，转入落后行业，推动市场广度扩大。这种交替轮动为整个牛市提供了更为扎实的结构。估值回归与盈利扩张：基本面打破泡沫论 (11:09) 针对科技巨头高额资本支出（Capex）引发的恐慌，Khoo 认为此类支出属于扩张性资本投入，长远看将巩固护城河并提升未来收入与利润率。当前标普 500 指数的远期市盈率（Forward P/E）仅为 18.7 倍，不仅低于 19.8 倍的 5 年均值与 19.1 倍的 10 年均值，更较今年初的 22 倍显著压缩。按内在估值分布来看，标普成分股中约 27% 处于合理估值，30% 至 31% 处于低估区间，仅 40% 偏向高估，整体市场并不存在全盘泡沫。财报表现进一步印证了基本面韧性。第三季度已披露公司的整体盈利增速达 30.2%，超出市场 9 月底预期的 29%。更为关键的是业绩扩容趋势：“科技七巨头”（Mag 7）的利润增速从前期的 33% 放缓至 22%，而其余 493 家标普成分股的利润增速则从 27% 加速至 32%。同时，企业净利润率已扩张至 17.0%，反映出企业在采用 AI 技术后带来的实际降本增效成果。对冲基金极端去杠杆与技术面筑底支撑 (17:44) 从机构筹码来看，对冲基金此前极度拥挤于投机性半导体与 AI 概念股（如 IREN、SNDK 和 MU），在这些股票自高点腰斩后被迫止损，引发了过去一周高达 -7.8% 的去总杠杆（degrossing），创下十年来的最快平仓速率。Khoo 援引历史数据指出，过去所有去杠杆幅度超过 5% 的极端抛售事件（如 5.8% 至 8.0% 不等），均精准对应标普 500 的阶段性周线低点，且在随后 1 个月、3 个月及 6 个月内均录得 100% 的胜率与 6% 至 12% 的反弹幅度。技术面同样显示整体上升趋势保持完整：20 日指数移动平均线（EMA）仍位于 40 日 EMA 上方，50 日均线亦高于 150 日与 200 日均线且持续向上发散。虽然标普短期跌破了 749 附近的支撑位，但下轨结构性支撑位于 716 摆动低点。Khoo 预估，即便回踩 716，最大回调幅度也仅约 8%，尚不足以构成 10% 的正式技术性调整。针对交易策略，他警告勿盲目裸买看涨期权（Call Options），建议通过带止损的股票多头或定义风险的净权利金期权策略参与反弹。历史参照：中期选举红利与AI浪潮真实体量 (22:42) 季节性周期方面，Khoo 分析了历次美国中期选举后标普 500 指数的表现。历史统计显示，自 11 月起的 3 个月周期内（11 月至次年 1 月），大盘平均涨幅为 8.1%，胜率达 95%（仅 2018 年例外）；在 6 个月与 12 个月的时间窗口内，平均回报率分别达 16.4% 与 22%，胜率均为 100%。尽管 Polymarket 预测民主党同时掌控参众两院的概率为 72%，但 Khoo 强调历史大涨行情独立于具体选举结果，10 月末至 11 月初往往是年内回调的底部。针对“AI 泡沫破裂”的观点，Khoo 将当前周期与 1994 至 2000 年的互联网泡沫进行了对比。互联网泡沫持续了 5.3 年，纳斯达克涨幅达 1,000%，思科在暴跌前市盈率高达 131 倍；而自 2022 年 11 月 ChatGPT 发布至今，AI 周期仅持续约 3.9 年，纳斯达克 100 指数累计上涨 137%（仅为当年体量的 13% 左右）。作为龙头，英伟达当前的远期市盈率仅在 17 至 20 倍之间，反映出其估值拥有真实的盈利支撑，并未重演千禧年前夕的投机狂热。 Adam Khoo 总结认为，当前科技股回调本质上属于高风险头寸的被迫平仓与牛市广度的拓宽，投资者不应将短期资本支出阵痛与结构性轮动误判为熊市崩溃；但他同时提示，历史概率并非确定性保证，2018 年等异常年份表明黑天鹅仍有可能发生，参与交易仍须保持严格的风控与止损管理。

Original transcript

[0:11] Hi guys. So the last couple of days [0:13] especially the end of last week seemed [0:15] like a big stock market crash uh to many [0:18] retail investors and the reason is [0:20] because many of the very popular retail [0:22] stocks which are the AI related stocks [0:25] they drop significantly. For example, [0:27] just look at Friday alone. This is the [0:29] last one day and you can see uh pretty [0:32] big drops after Amazon and and Alphabet [0:36] released their earnings. So for example, [0:38] you can see Friday alone uh Micron very [0:41] popular stock but I don't own it down [0:43] 5.3% AMD down 10.88%. [0:47] You got um Intel down 28% in one day [0:50] after earnings. Uh you have got Sendis [0:53] down 13.47%. [0:55] So many of the AI related names and even [0:58] the hyperscalers. So you can see Friday [1:00] for example, uh Google down 1.4%, you've [1:03] got Meta down 1.53%. [1:07] And from the highs, it's also pretty [1:10] high. For example, Sandis down 50% from [1:13] the high. Micron down uh 30%, you've got [1:17] Intel down 50%, you've got iron down 50% [1:20] as well. You've got Meta, you've got [1:22] Alphabet, both down 30% from the high. [1:25] So if you are mostly invested in these [1:27] stocks, which many retail traders are, [1:30] you would think it's a bare market. It's [1:32] a stock market crash. [1:34] However, if you look at the actual S&P [1:37] 500, [1:39] it hasn't dropped very much. It's only [1:40] down like 3%. [1:43] So why? And the reason is this. You can [1:45] see that all these AI related stocks and [1:47] hyperscalers have dropped double digits [1:50] even up to 50% from the high but the [1:53] money did not disappear. The money [1:56] rotated to the nonAI stocks to the you [2:00] know boring financial stocks, [2:03] healthcare, industrials and consumer [2:05] defensives. In fact, you can see that in [2:07] the last day Friday these were all [2:10] green. The money rotated there. And if I [2:14] change this to the last week, you can [2:16] see the same thing over here. There we [2:18] are. Look at that. So all this is kind [2:19] of like negative, but healthcare, [2:22] industrials, energy, consumer defenses [2:25] are all going up. So this is actually a [2:28] very healthy development for the market. [2:32] So what this means is that the overall [2:34] market, the S&P 500 is not crashing. No. [2:39] But it is there's big rotation within [2:42] the S&P 500. [2:45] So money is rotating from the AI stocks [2:48] to the nonAI stocks which I talked about [2:51] in August, right? I called it the [2:52] anti-bubble mania where money will [2:55] rotate from AI to nonAI and it's not a [2:58] sudden thing. It goes in stages. Now am [3:01] I saying the AI trade is dead. No more [3:04] AI boom. No. I think we're still early [3:06] in the AI revolution. I'll give you some [3:08] charts to reinforce why I think so. But [3:11] along the way, what I'm saying is this [3:13] that there'll be sporadic rotations to [3:15] non AI stocks. That's why for me my [3:17] portfolio, I'm diversified between the [3:20] two. So whichever goes up, my portfolio [3:23] stays resilient. Okay. Now, if you look [3:26] at, for example, let me show you the [3:29] last [3:30] let me show you year to date, right? If [3:32] you look at year to date, you can see [3:34] that the market is still pretty much [3:36] very positive for the year. In fact, the [3:37] S&P is up like about 10 11% for the [3:40] year. Okay? And it's again all this [3:43] rotation. So what has happened in the [3:46] last 3 years is you can see that the [3:49] majority of the the gains are [3:51] concentrated in the AI stocks, the [3:53] semiconductors, the hyperscalers and so [3:55] on so forth, right? So that has gone up [3:57] a lot, the AI stocks. Then the [4:00] financials, the healthcare industrials [4:03] have kind of like been left behind. [4:05] However, what has happened recently is [4:08] that now these non-AII stocks are [4:11] beginning to catch up. But for this to [4:14] catch up, this has to go down a bit [4:16] because the big institutions have to [4:18] take profit. They got to sell some of [4:20] the AI stocks and then rotate to the non [4:23] AI which then catch up catches up, [4:25] right? [4:27] But what will then happen is then these [4:28] AI stocks will run again. Okay, maybe [4:31] not immediately but it'll run again and [4:34] then pretty soon after a while is then [4:36] going to sell off to take profit and [4:37] this will catch up run again catch up [4:39] run again catch up. That's what's going [4:41] to happen in the next couple of months [4:43] or one or two years. So overall the [4:46] market is broadening and it's a good [4:48] sign. is a very healthy uh bull market [4:51] just rotation within the bull market [4:53] that seems like a bare market if you're [4:55] purely invested in the AI part of it. So [4:58] let's take a look at a chart of the S&P [5:00] 500 ETF and you can see that again while [5:02] it looks like a big blood bath amongst [5:05] certain stocks. The overall S&P it's [5:08] like a little scratch. Okay, it's just [5:10] dropped uh less than 4%. In fact, just [5:13] about 3 something% from the high. Not [5:17] even a correction, just a teeny weeny [5:21] pullback, right? So, if you look at the [5:23] overall structure of the S&P 500, [5:25] technically it is still on an uptrend. [5:30] Why? Well, you can look at the moving [5:32] averages, you can see the 20 EMA, the [5:34] red dotted line above the 40 EMA. So, it [5:37] tells you that the the the uptrend on a [5:39] short-term basis is still technically on [5:41] an uptrend. You've got the 50 moving [5:43] average in blue above the 150 moving [5:46] average in green and uh this guy still [5:49] sloping up. The 50 above the 150 200 [5:52] simple moving average still sloping up. [5:54] So the uptrend is still for now very [5:56] much intact and it's simply a little [5:58] pullback on the major uptrend. Although [6:01] if you look at the price action you can [6:02] see it's been pretty choppy choppy [6:04] choppy choppy choppy but that uptrend is [6:07] still intact. So right now again we're [6:08] down just over 3% from the high. Now, [6:12] could we still go lower in the short [6:13] term? Of course, everything is possible. [6:16] Everything is possible, right? So, where [6:18] could we bottom if it does go lower in [6:20] in the short term? We can never predict [6:22] the absolute bottom. We can just look at [6:25] support levels to make intelligent [6:28] guesses. So, there's a first level of [6:30] support over here where you can see it [6:33] kind of like breached that first support [6:35] and this is the most recent swing low. [6:37] And what happens today, I don't know, [6:40] right? So if it drops further but it [6:42] manages to make a double bottom here [6:44] like a bear trap which is what Alson Chu [6:48] my buddy likes to say then it it could [6:51] bounce back right but if it breaks this [6:55] uh 749 where's the next floor? Where's [6:59] the next support where demand uh [7:02] historically has uh been stronger than [7:05] supply and then driven the price back [7:06] up? The next support would be this uh [7:09] significant swing low at 716. And if it [7:12] does drop all the way to 716, that would [7:14] be about an 8% [7:17] decline from the high, which is not even [7:18] a correction. Remember, correction has [7:20] to be more than 10%. Bare market more [7:22] than 20%. So, uh not even a correction. [7:25] Now, my guess is that again, I can't [7:29] tell you whether it's going to break [7:30] this support, but if it does, I don't [7:32] think we're going lower than 716, which [7:34] means I think at the very most we see an [7:36] 8% correction and we're going to bottom [7:38] somewhere here and then, hallelujah, all [7:41] the way to the end and to the next year. [7:44] But, of course, if today ends very [7:47] strongly, it could bottom over here, [7:50] which means we already we already near [7:51] the bottom. So we'll see how it all [7:53] depends on what happens tonight. Now the [7:56] reason why I remain quite optimistic [7:58] about the market in the next couple of [8:00] months or even the next one year is [8:02] because number one if you look at the [8:04] fundamentals of the companies in the S&P [8:07] 500 they are very very strong and I'll [8:10] run through the data with you in a [8:11] while. Number two the market is not [8:14] expensive. In fact the market is cheaper [8:16] today than it was at the start of the [8:19] year. The next reason is because of [8:21] positioning. So many of the hedge funds [8:23] have already cut a lot of their leverage [8:26] positions last week. So positioning is [8:28] washed out which means a lot of the [8:30] selling has been done. The other reason [8:32] is because I think that the AI trade, [8:34] [snorts] the AI revolution is still very [8:37] much in its early stages and not [8:40] anywhere near a bubble. Again, I'll show [8:41] you the data in a short while. The fifth [8:44] and the last reason why I remain [8:46] constructive of the market is because [8:48] midterm elections in the US are coming [8:51] on the 3rd of November. And [8:53] historically, what happens after the [8:54] midterm elections for the next 3 months, [8:56] 6 months, 12 months, historically, it's [8:58] been one of the most bullish times of [9:01] the market. No guarantees, but the odds [9:04] are very much in the favor of the [9:07] market. So, let's take a closer look. [9:09] Again, if you take a look at the sector [9:10] by sector performance, you can see what [9:12] I'm talking about about the market [9:14] broadening. So, in the last month, [9:16] October, uh you can see that technology [9:19] and communication services had the [9:22] biggest sell-off. So, again, if you're [9:24] concentrated only on on those names, [9:26] then you may see, oh, it's a bare [9:27] market, my portfolio is destroyed. You [9:29] know, technology down 8.56%. [9:32] Communication services, which uh include [9:34] Alphabet and Meta, uh down 12.25%. But [9:37] like I said, the money didn't disappear [9:39] into thin air. The money rotated [9:43] into all the other sectors. Consumer [9:46] defenses up 11%, energy up 10%, [9:49] healthcare up 9%, utilities up 8%, real [9:52] estate up 4%, cyclicals up 3.88%. That's [9:56] why it's very important to diversify [9:58] your portfolio so that no matter what [10:00] happens, your portfolio stays resilient. [10:02] Now, having said that, my portfolio has [10:04] dropped as well in October. Okay, before [10:07] October, my portfolio was up like 25% [10:10] year to date. Now it's dropped to 18.7%. [10:14] But I still can't complain because I'm [10:16] still higher than the S&P 500 which is [10:19] up I think about 10 or 11%. And it's all [10:21] about uh proper portfolio [10:24] diversification and allocation. However, [10:26] year to date, year to date you can see [10:29] that technology is still doing very [10:31] well, right? Technology up 19%, can't [10:34] complain. So it's simply about profit [10:36] taking from technology where most of the [10:38] AI names are and then rotating to the [10:42] other sectors that need to catch up to [10:44] broaden the market. Healthcare up 15%. [10:47] I'm heavy into healthcare. So that is [10:49] helping my portfolio a lot. Uh consumer [10:52] defensives up 14%, materials up 6% and [10:55] so on and so forth. right now year to [10:58] date the sectors that are not performing [11:00] will be communication services again [11:02] because of matter alphabet which I own [11:05] but again I'm not concerned because the [11:07] overall underlying business is doing [11:09] very very well and watch my last video [11:12] where I talk about it the only reason [11:14] it's gone down is short-term sentiment [11:18] panning over higher capex capital [11:21] expenditures which to me is a good thing [11:23] because it is growth capex X that will [11:26] lead to even higher [11:29] revenue and profits in the long run and [11:31] lead to the companies becoming even more [11:33] dominant and their modes even stronger. [11:35] So, it's not something I'm concerned [11:37] about. It's something I'm taking [11:38] advantage of. Let me show you the [11:40] underlying facts and fundamentals of the [11:43] market and you decide whether you want [11:45] to be bullish or bearish. I don't [11:47] believe that you should just listen to [11:48] me blindly. You make up your own mind. I [11:50] can tell you what I think. So, if you [11:52] look at the S&P 500, the forward PE [11:56] ratio, it is currently 18.7 times, which [12:00] is below the 5-year average, forward PE [12:03] of 19.8 times. This should be 19.8 and [12:06] below the 10-year average of 19.1 times. [12:10] So, in other words, based on a forward [12:11] PE, the S&P is cheaper today than the [12:16] last 5 to 10 year average. and is [12:18] cheaper today than it was at the start [12:19] of the year where it was 22 times [12:22] forward. Now again this is based on [12:24] forward PE ratio. If you actually uh [12:27] look at the intrinsic values of the [12:30] individual components of the S&P 500 and [12:33] you can check it out from stock oracle. [12:35] It does all the calculation for you. You [12:38] can also see that the market is not [12:40] expensive. It is nowhere near a bubble. [12:42] So you can see that out of the 500 [12:44] companies [12:46] in the S&P 27% [12:49] are fairly priced. They're selling [12:51] within plus - 10% of their intrinsic [12:54] value. You have got these stocks here [12:57] that are undervalued which are roughly [13:01] about 32% [13:04] about 30 31% are undervalued. And of [13:07] course you do have stocks that are still [13:09] way overvalued, right? overvalued [13:11] overvalued over here. That makes up [13:14] again about another 40% here. So, it's [13:17] pretty balanced. And of course, as [13:19] investors, we are we want to hunt high [13:22] quality stocks, ideally ones with wide [13:25] economic modes, the strongest modes that [13:28] are fairly valued, undervalued, and very [13:30] undervalued. Okay? So, the market is not [13:32] expensive. It's nowhere near this [13:34] bubble. Yeah. Now, if you look at [13:37] earnings, have they done well? Yes. very [13:39] very well. So right now we're in the [13:41] middle of the quarter three earnings [13:43] season and companies are reporting [13:45] earnings and even the companies that [13:48] drop a lot like foret drop like you know [13:51] 25%. By the way, I own Fortnite as well [13:53] and 25% is like ouch, right? But it [13:56] doesn't matter because year to date it [13:57] is still up I think 70% up year to date [14:01] even after the 27% drop. So I'm not [14:04] complaining, right? So even if you look [14:07] at Meta, Alphabet, Foret would have [14:10] dropped you know 20 30%. [14:13] But their fundamentals are actually [14:15] doing very well and that's why I'm not [14:17] concerned about the drop. See, when a [14:19] when a stock price drops because the [14:23] fundamentals suck, then I get worried. [14:26] Oh Right. But if the stock price [14:29] drops, when the fundamentals are very [14:30] good, I go, who the hell cares? In fact, [14:33] I take advantage. I add more shares if I [14:35] don't have a big enough position. Okay, [14:38] so going back to this. So right now [14:40] earning season and you can see that [14:42] overall the S&P 500 those that have [14:45] reported they're reporting a aggregate [14:49] earnings growth of 30.2% for quarter 3 [14:53] which is above what was expected at the [14:56] end of September which they expected 29% [14:58] growth. So overall earnings growth is uh [15:01] above expectations. Uh look at this [15:04] chart and you can see this black line is [15:06] the forward 12 months earnings per share [15:10] which is the earnings per share uh of [15:13] the companies for the next 12 months [15:16] that are projected and that is going up [15:19] very very nicely right and the share [15:21] price uh goes along with earnings. So [15:25] remember that in the long run price [15:29] follows earnings. It's as simple as [15:31] that. Price follows earnings, right? And [15:33] more recently, you can see that earnings [15:35] are going up, but price has been going [15:38] sideways. So, there's a lot of room for [15:40] price to keep going up to catch up with [15:43] the earnings that are being projected. [15:48] Now, before this earning season, you can [15:51] see that the majority of the earnings [15:52] growth came from the Magnificent 7. 33% [15:56] from the Magnificent 7 which is your [15:58] Amazon, your Google, your Meta, your [16:01] [clears throat] Nvidia, so and so forth, [16:03] right? And 27% earnings growth are from [16:06] the other uh 493 companies in the S&P. [16:12] So people have been always saying this [16:13] year, oh all the earnings, all the gains [16:16] are concentrated in just those few [16:18] names. No good, very bad. But now is [16:22] it's broadening out. the earnings are [16:24] broadening out because this earnings [16:25] season you can see that now the [16:28] magnificent 7 their earnings growth are [16:31] 22%. Still not bad but 32% of the [16:35] earnings growth are coming outside [16:38] of the magnificent 7 from the other [16:40] companies your your industrials and your [16:43] finance and stuff like that. So that [16:45] means the the the the bull market is [16:48] actually broadening out which is a good [16:50] sign. And ultimately people ask this [16:53] question is AI really helping companies [16:57] make more money? Is AI really leading to [17:00] higher productivity and higher margins? [17:03] Here's your proof, right? And you can [17:05] see that uh the net profit margin is now [17:09] at 17%. [17:12] Look at where it was back in 2024 [17:16] and 2026. So in two years, the net [17:18] profit margins of the companies have [17:21] risen significantly. [17:23] That's expected to be a bit of a drop, [17:24] but then resume. So there's real cost [17:28] savings. There's real productivity gains [17:30] in the in the the the companies in the [17:32] S&P and that will lead to overall higher [17:34] earnings growth. [17:36] So that is the fundamentals of the S&P. [17:38] Like I said, it looks pretty strong to [17:40] me. Maybe not to you, but to me. Okay. [17:44] The second reason uh like I said why I'm [17:48] not bearish at this point of time is [17:50] because of positioning. [snorts] So what [17:53] happened uh last week especially is many [17:56] of the hedge funds have been losing a [17:59] lot of money this year by the way. In [18:00] fact, it's one of the worst years of [18:02] hedge funds because many of the hedge [18:04] funds, they have been again crowding [18:07] into a lot of the AI stocks, the very [18:09] overvalued, hyped up like iron, send [18:12] this, micron, these are I don't touch, [18:15] right? To me, it's it's too dangerous to [18:16] touch. But the hedge funds have been all [18:19] that. Okay? And then when all these [18:21] crash 50% right from the high, many of [18:25] these hedge funds are bleeding like [18:27] crazy. So they're cutting losses, [18:28] cutting, cutting, cutting, cutting. And [18:30] it is called degrossing, which means [18:32] they're cutting their positions. And you [18:34] can see that although the S&P is only [18:37] down 3%. But the hedge funds had one of [18:41] the biggest [18:43] degrossings in 10 years. In fact, it [18:47] minus 7.8%. [18:50] That is a big thing. And so that means [18:52] the the hedge funds have been um cutting [18:55] their positions at the biggest rate in [18:58] 10 years. Okay. Now what has happened [19:02] other times when hedge funds cut loss [19:05] and they cut their positions and it was [19:08] more than a 5% cut. So you can see these [19:10] were all the times it happened right? So [19:12] 5.9% degrossing 7.1% [19:17] 6.1% 5.8% 8% 5.9% and 6.6%. [19:23] So what happened during all these uh [19:26] past events, right? It happened to [19:29] coincide with the lows of the S&P, [19:34] right? It coincided with the low of the [19:35] S&P. This was not exactly the low, but [19:39] it was near the low, right? It was one [19:41] of the lows, right? Here was the low. [19:44] The low. This was a a dip, but it was a [19:46] low. This was the low. And right now we [19:49] are here. [19:52] Why? Because when this happens, it tells [19:56] you that the hedge funds have been [19:58] selling, selling, selling, selling. They [20:00] sell like crazy. Now, after they sell [20:03] everything, what happened? There's no [20:05] more selling because all the selling has [20:08] been done. And there's no more selling, [20:10] then the market is unlikely to go very [20:12] much lower, right? And a little bit more [20:14] buying will push the market higher. Now [20:17] again, there's no guarantee that we are [20:19] bottoming. There's no guarantee in the [20:20] market. So please don't say I'm going to [20:22] go ALL IN WITH CALL OPTIONS. DON'T DO [20:23] THAT. OKAY? Because one thing I learned [20:26] about being in the markets for close to [20:27] 30 years is that anything can happen. [20:31] This just tells me that it's a good [20:33] probability [20:34] that we're near the bottom, but it's not [20:36] a guarantee. All right? So if you are [20:38] trading and you enter the market now, [20:41] wait for a confirmation signal from the [20:44] candlestick patterns. And even when you [20:45] enter, PUT A STOP LOSS and always risk a [20:49] small percentage of your capital. In [20:51] case it breaks down, you cut loss, you [20:54] go away with a scratch. If you go all [20:56] in, no stop loss, it crash, you die. [20:59] Okay? And please don't ever buy call [21:01] options when you're trading. You know, I [21:04] talk about this in my options trading [21:05] course. Tom Sosnoff, who is the [21:09] legendary creator of Think or Swim and [21:11] Tasty Trade, he just did an interview. [21:13] He said, "I have not bought a call [21:15] option in 25 years." And this dude is [21:18] one of the best option option traders in [21:20] the world. And that kind of like [21:22] reinforce what Bangfan and myself [21:24] believe that buying call options long [21:27] run is a losing game. So when we're [21:29] bullish on the market, we never buy [21:31] straight call options. We never buy [21:32] leaps because even if you're right on [21:35] the direction, the time decay and the [21:38] volatility volatility crush will kill [21:41] you. So we use other strategies like [21:43] bullish synthetic spread strategies or [21:46] we use uh selling we sell cash secured [21:48] puts or we sell credit spreads right all [21:50] these we'll talk about more in the [21:52] upcoming uh black market x live event on [21:55] options that's coming up in November uh [21:58] details are not out yet once they're out [21:59] remember to register for black market x [22:02] now why x because piranha profits this [22:05] is our 10y year anniversary so 10 is x [22:09] we call it black market x all All right. [22:11] So I just to share that off the top of [22:13] my head right now. So if you look at the [22:16] actual table you can see. Yep. So these [22:18] were all the times when the the [22:20] degrossing was more than 5% and it was [22:24] that was the S&P low for the week. What [22:27] happened one month later? 1 month later [22:29] in all those past outcomes the market [22:33] was up 8% 6% 7% 12%. 3 months later they [22:37] were all up. 6 months later they were [22:39] all up. So based on a very small sample, [22:42] I know it's a small sample, not [22:44] statistically significant, but based on [22:46] a small sample, it is uh 6 out of six, [22:50] the market goes higher after this big [22:53] degrossing event. Now I showed you this [22:56] table in the previous previous video, [22:58] but I'll show it to you again. What [23:00] happens after midterm elections that is [23:03] coming up on the 3rd of November. These [23:06] were all the previous midterm election [23:09] years and you can see what happened from [23:12] November [23:15] to [23:17] 3 months later which will be November, [23:19] December, January. Right? This is to [23:21] January. What happens from November to 6 [23:23] months later? What happens from November [23:25] to 12 months later? And you can see in [23:28] all those years [23:30] they are mostly positive returns. only [23:33] one negative return here. You spoil it. [23:36] 2018. Okay. So, in the next 3 months, [23:41] the average gain of the market in a [23:43] midterm year is 8.1%. [23:46] And 95% of the time, it's positive, [23:50] right? 6 months from November, 16.4% [23:54] average return, 100% win rate based on [23:58] the past samples, right? uh 12 months [24:01] from November, 22% average return, 100% [24:04] win rate. Again, no guarantees is going [24:06] to happen this time. It could be another [24:08] 2018. Let's hope not. But again, the [24:11] odds are in our favor regardless of who [24:14] wins the elections. Now, the poly market [24:17] odds are putting the Democrats sweeping [24:20] the House of Representatives and the [24:22] Senate at about 72% odds. Uh so whether [24:26] they do or not, it doesn't really [24:27] matter. the market tends to rally [24:29] regardless of who wins. If you look at [24:31] the actual seasonality pattern of the [24:35] midterm year, you can see what happens [24:37] before the actual elections. You get a [24:39] crash, which is what's happening now, [24:41] right? It bottoms somewhere in October, [24:45] early November, and then hallelujah. [24:48] And then sometimes in December we get a [24:51] little pullback, but we do end up higher [24:53] than where we are uh before the midterm [24:56] elections. Again, no guarantees, but [24:58] that's the pattern. That's the pattern. [25:00] Uh that gives us a bit of intelligent [25:02] guessing. With many of the AI related [25:05] names down 20, 30, 50%, is it the end of [25:08] the AI uh revolution trade? You never [25:12] know, right? But I don't think so. And I [25:14] don't think so for two reasons. The [25:16] first reason is duration. Second reason [25:19] is valuation. Now this chart compares [25:23] the current uh AI boom in red with [25:27] the.com boom in blue which I was in when [25:31] I was a young man in my early 20s. And [25:34] if you compare the two, you can see them [25:36] side by side. Right? So right now the AI [25:38] boom is in its [25:41] third year right to be specific 3.9 [25:43] years coming to the fourth year. And so [25:46] far since it started the chat GPT moment [25:49] started in 2022 [25:51] uh the NASDAQ 100 is up 137% [25:55] so far in the AI boom 137% now and in in [26:00] 3.9 years right now if you compare it to [26:02] the com boom the.com boom lasted 5.3 [26:08] years. So, if the AI boom lasts as long [26:11] as the dotcom boom, which I think it [26:13] will or more, then we've got at least [26:15] another 1.4 more years to go in terms of [26:18] duration. Okay. In terms of gains, you [26:21] can see that the com boom, the NASDAQ [26:25] gained a total of 1,000%. [26:29] Since it started in 1994, right? 1,000% [26:34] during the entire AI boom. Sorry, the [26:37] entire boom. My bad. Right. But the AI [26:40] boom is only up 137%. [26:44] So is it's only 10. In other words, the [26:48] AI boom is only 13% [26:52] of the com boom. So we are nowhere near [26:57] where the dot boom went, right? And the [27:00] com boom at a time before it burst here, [27:03] you know, the the the the markets were [27:06] trading at crazy multiples. it was [27:08] extremely overvalued. But if you look at [27:10] the companies that make up the S&P or [27:12] even the NASDAQ today, they are not [27:15] expensive. In fact, many of them are [27:17] actually quite cheap if you do your [27:18] valuation. And that's why I think we [27:21] still have quite a room to run. Maybe [27:23] not all the way there. You never know. [27:24] But even if it goes like halfway there, [27:26] I think there's still significant [27:28] upside. [snorts] Now, last chart I'm [27:30] going to show you is people like to [27:32] compare Cisco with um Nvidia because [27:36] Nvidia is kind of like the poster boy [27:38] for the AI boom, right? It's the most [27:40] important company in the AI boom. But [27:42] back during the com boom, the most [27:45] important stock at the time was Cisco. [27:47] And people like to compare Nvidia is [27:49] like Cisco. Cisco eventually burst, it [27:51] collapse. So, Nvidia could burst and [27:52] collapse. Yeah, it could happen. It [27:54] could happen, but not yet. I don't think [27:57] so. Right. Again if you do a comparison [28:00] you can see what happened to Cisco. So [28:03] Cisco is in blue and you can see that if [28:06] you compare duration at this point of [28:09] time which is after [28:12] uh sorry 3.9 years right so at this [28:14] point of time where was Cisco Cisco was [28:17] somewhere here. All right Cisco was [28:19] somewhere here uh which was up 700% at [28:23] this point of time. Nvidia at this point [28:26] of time is up a,000%. So slightly more [28:28] than Cisco. Okay. But look at where [28:31] Cisco went eventually. Cisco went on to [28:34] peak somewhere here. Cisco eventually [28:38] went up [28:40] 4,200%. [28:42] Right? 4,200% [28:47] from the beginning. Okay. And Nvidia is [28:51] up 1,000%. [28:53] So, if Nvidia reaches 4,000% if I'm not [28:57] saying it will if could Nvidia 4x from [29:02] here [29:05] maybe you don't know so what I'm saying [29:07] is there could still be a lot of upside [29:08] based on percentage gains based on [29:11] valuation [29:13] Cisco before it crashed what was the [29:16] forward PE the forward PE ratio of Cisco [29:19] was 131 times PE it was freaking insane. [29:23] 131 times 4 P. Okay. Nvidia's forward PE [29:28] today is only 17 times. [29:34] So Nvidia is actually bloody cheap if [29:36] you compare it to Cisco, right? So we're [29:38] nowhere near Cisco. And if in if Nvidia [29:42] gets to Cisco's level, there could be [29:44] another 400% gain from current levels. [29:46] I'm not saying it's going to happen, but [29:47] I'm saying something to think about. All [29:49] right. So, thank you for listening and [29:51] as always, do subscribe to this channel [29:54] if you have not already done so so you [29:56] get the latest notifications and [29:58] remember to register for the upcoming [30:00] Black Market X, our 10year anniversary [30:03] where we're going to share the lessons [30:05] learned for the last 10 years of how we [30:07] beat the market consistently. Details [30:10] are not not out yet. Once they're out, [30:12] we will let you guys know. Register is a [30:14] free series of webinars coming up in [30:16] November. Thank you. See you soon. If [30:18] you want to catch my latest videos, [30:20] click on the subscribe button right now. [30:22] Click on the bell so you get instant [30:24] notifications once I upload my latest [30:26] video. If you want to check out my [30:28] online courses, go on to [30:30] piranhaprofits.com [30:32] where you're going to learn how to [30:33] invest and how to trade the financial [30:34] markets and create an income from all [30:37] around the world. If you want to join my [30:39] live Wealthacademy program, go on to [30:42] wealthacademy global.com and find out [30:44] more about how you can learn investing [30:46] and trading live online. This is Adam [30:48] Coup and may the markets be with