"Downhill Acceleration" Ahead?

In early 2021, I took my family skiing at Jackson Hole, Wyoming.

It was only my second such ski trip ever - the last time being at Snowshoe, West Virginia some 30 years earlier.

And there really is a difference, as they say, between the "powder" snow in the Rockies, versus the "wetter" snow in the lower-altitude, east coast Appalachian mountains.

I learned that very quickly on the first day while attempting to ski down what looked - to me - like a bunny slope. But unprepared for the lower-friction powder snow, I suddenly found myself careening down the mountain, feeling very much like I was about to lose control.

"So this is how people break their leg on a ski trip..." I remember thinking at the time.

Luckily, I was able to pull up before the scare turned it something requiring the ski patrol, a St. Bernard dog, and maybe a medivac helicopter!

I can only hope (for the sake of bullish investors at least) that we do not have a similar experience with the stock market in the coming week - because things do...not...look...good. The market indexes all ended deeply in the red, and the Nasdaq Composite finished at its lowest price since June:

Only a month ago, we were at a similar point.

And for a handful of days, the indexes managed a small bounce. Now here we are again, with bullish investors staring into the abyss.

So it'll be interesting to see whether we finally see "downhill acceleration" in the coming week. or - as we experienced in September - yet another bounce.

So what does this mean for you?

The biggest potential impact falls on late-comers to stocks like Nvidia (NVDA). The stock is at its most vulnerable point in a month, and threatens a much sharper plunge unless bulls can once again rush to the rescue in the coming week.

To me, the stock looks ripe to fall sharply through the red-toned "gap" on the chart above - which was created when the stock leapt higher back in June as the craze for AI stocks swept the market. A drop through that gap would signal a decline of nearly 30%.

But does it mean a plunge has to happen? The "megacap tech" stocks - Apple, Amazon, Nvidia, Microsoft, Google, Tesla, Nvidia, Meta - have enjoyed a hallowed position with Wall Street and Main Street investors, with more lives than a cat. Each time it looked like their end was nigh...has turned out to be wrong.

But in the less-watched corners of the stock market, the deterioration in many stocks continues unabated.

For example, smallcap stocks - represented by the Russell 2000 index - finished last week at their lowest point since October 2022. If the selling continues, we could easily wind up seeing the index retreat to its October 2021 levels by the end of the coming week.

But suffice to say there's probably been no point since the big megacap rally started last spring that the market's looked more vulnerable than now.

Best of goodBUYs,

Jeff Yastine