Bottom-Up Roadmap for Stocks Over the Next 6-9 Months
Every trader, in order to be successful, must have some systematic process for identifying, entering, and exiting trades. Each trader’s specific process is going to be unique to their own experiences and beliefs. My own process has been developed over almost 20 years in markets, first as a hobby while I was a telephone salesman in a cubicle for a big tech company, next as a trader on a prop desk, then as a professional equity portfolio manager for a small RIA, and lastly as a refinement when I completed the CFA exam. Because I operated in both the trading and investing worlds, my process is a combined approach that incorporates both fundamentals and technicals. Similarly, I combine both a top-down and bottom-up approach to asset, sector, and individual stock selection. In previous posts I’ve explained my top-down reasoning why my view continues to be that we are in the contraction phase of the business cycle. This week I’ll present what my bottom-up analysis reveals to us as we try to anticipate price movements in the stock market over the next few quarters into 2027. As opposed to a top-down approach which starts from trends and works down more granularly to individual stocks, a bottom-up approach starts with individual stocks and works up to extrapolate larger themes. A bottom-up approach is a wonderful antidote for the narrative heavy environment in which we currently find ourselves. An analysis of individual stocks often reveals that a popular narrative is not gaining traction in the stocks that should be strong if the narrative were true. As a naturally born contrarian, I’m skeptical of any popularly accepted narrative, and I rely heavily on scrolling through thousands of charts a week to verify that the prevailing narrative is being validated by price. Thankfully, we don’t have to go over thousands of stocks to get a workable roadmap for how to deal with this market into 4Q 2026 and early 2027. A smaller sample of stocks is enough so I’ll keep my bottom-up analysis contained to a manageable list of sectors and stocks in this week’s post. I’ve taken the leading stocks in the sectors that are most crucial to the US business cycle at the moment: semi-conductors, transports, industrials, utilities, chemicals, and basic materials. The industrial sector contains seven sub industry groups: aerospace, automotive, construction, distribution, electrical equipment, building products, and machinery. I’m focusing on just the leading stocks in these sectors because I think they are a full representation of the most influential narrative in the stock market today: the AI buildout. I want to analyze the individual stocks in these sectors to discover any clues they might tell us about the future path of the AI buildout, which will dictate the path of the US business cycle, which will ultimately influence stock prices. We start at the bottom and work our way up to get to our goal: anticipating the movement of stock prices. The sectors and stocks we’ll analyze seem like a lot of material to digest, but I’ve distilled the information down to a basic form that is easy to absorb in a short amount of time. It’s a useful exercise for anyone risking their capital in the stock market. These are the stocks we’ll be analyzing in each sector; semi-conductor: ADI, AVGO, MRVL, MU, QCOM, TSM, and TXN; transports: UNP, NSC, CSX, JBHT, ODFL, DAL, and UAL; industrials: aerospace: GE, RTX, BA, LMT, GD, HWM, TDG, LHX, and NOC; auto parts: MGA, BWA, and MOD; construction: PWR and FIX; distribution: URI, GWW, and FAST; electrical equipment: ETN, VRT, and EMR; building products: TT and JCI; and machinery: CAT, DE, PH, ITW, CMI; utilities: SO, NEE, and DUK; chemicals: APD, DOW, LYB, SHW, ECL, PPG, and DD; and basic materials: BHP, RIO, FCX and NEM. I’ll begin on the fundamental side and analyze the valuations and end with a video on the technical side to show what I think the price and volume structures are warning us about. The only goal I have when analyzing fundamentals is to answer the question “do I want to own this stock?” That means I like to think as a business owner would if he was considering pouring all his family’s capital and his life’s energy into a business. I like to take the 15 year average of pretax income as a rough estimate of what the company would be able to earn on average over a business cycle, in other words, its earnings power. If the market cap of equity is 10 times the average earnings power, I know that stock is probably below fair value. If 10x is below fair value, 20 times the average 15 year earnings power is about the top of the limit. 20x means there’s very little room left for good price appreciation from an ownership perspective. Stocks that trade this high are for rentals only, not ownership, as they are mainly earnings growth stories that can experience temporary, but powerful price movement in either direction. The market cap to earnings power ratio over this 15 year time frame is what I refer to as the PE15. I like to see lots of sectors with low PE15s because that means too few positive outcomes are priced in, and any good development will cause money to flow in. If enough sectors of the market have low PE15s, it means the market is attractive as a long term asset. Long term buyers are what create price trends that last. However, if the market is unattractive to long term money, I would not expect a new price trend higher to materialize in the next 6 to 9 months. The PE15’s for each group of stocks by sector and my assessment of the potential for a proper trend higher are listed below, but if you want to jump to the conclusion without any of the detail, here it is: with a couple exceptions in mainly chemical commodities, natural resources, and small auto
Continue Reading -->The Survivor Market
Bad news? Who cares? This market is a survivor. Keep reading for the evidence. Skip Ahead! This Is the Survivor MarketWe May Have a New AI SuperstarCrypto Is Back on TopSentiment Is Not BullishThe Great Rate Debate ContinuesNext Week SHOULD Be QuieterThe Pristine Mentorship Is Open This Is the Survivor MarketSeptember is historically the worst month of the year for the stock market. And we’ve had plenty of tricky news to navigate, including:Hot CPI & PPI reportsThe FOMC raising rates and signaling more hikes comingThe 10-Year Treasury Yield hitting 5%OpenAI’s Sam Altman and Anthropic’s Dario Amodei calling for a slowdown in AI developmentCrude oil hitting $100+ because of ongoing Iran tensionsBut all things considered, we’re hanging in okay.The SPX is down 0.7%, while QQQ is up 0.1%. And the leading semiconductors are up, with SMH rising 1.4%. Technically, the S&P tends to fall an average of 0.6% in September. So we’re doing worse than usual. But falling just -0.7% in the face of all the aforementioned bad news is impressive. This market is a survivor. And it may be thanks to all this bullish AI news:We May Have a New AI SuperstarThe market got a short-term spook Monday when OpenAI’s Sam Altman and Anthropic’s Dario Amodei called for a slowdown in AI development. But we keep seeing more and more signs of staggering demand for AI infrastructure. This week, networking equipment maker Ciena (CIEN) announced it expects 30% compounded annual revenue growth through 2029. Power infrastructure name Forgent Power Solutions (FPS) skyrocketed this week after a monster earnings report thanks to data center demand. By the way, FPS is a clear candidate to be the next AI superstar. It’s growing like mad, dropped gigantic guidance, and it’s still 40% off the highs:Meanwhile, neoclouds CoreWeave (CRWV) and Nebius (NBIS) both implemented price increase for compute capacity. And Nvidia’s Jensen Huang said the company will double chip sales next year. The good times just keep on rolling. And that’s helping hold up the economy and market.Crypto Is Back on TopBitcoin and Ethereum have been a mess this year. But they’ve picked up steam, and the Grayscale Ethereum Trust ETF (ETHE) is now 70% off the lows. And it looks like it may be breakout out of its month-long range.Sami Abusaad just explained the bull case for ETHE on Wednesday, when it was trading at $19.33. Sentiment Is Not BullishThe latest AAII Sentiment Survey shows that just 28.8% of investors are bullish.This is down from 38.0% last week, and it’s well below the long-term average of 37.5%. Meanwhile, 53.3% of investors are bearish. This is the highest bearish reading since May 1, 2025. Yes, 2025. Not 2026. Plus, CNN’s Fear & Greed Index is at just 28/100. Fear & Greed was in the mid-60s in August. The crowd is not exactly in manic depression mode. But there is not a lot of joy out there.The Great Rate Debate ContinuesThe FOMC raised rates by 25 bps on Wednesday, with Chair Kevin Warsh saying “The plain fact is that inflation is too high and has been for too long.” The CME’s FedWatch Tool now shows the market is pricing in a 58% chance of a 25 bps rate hike at the October meeting.And it’s pricing in a 44% chance of a third hike at the December meeting. This has the 10-Year Treasury yield at just over 5%. And this is fascinating, because there was a time when people were worried about the 10-year hitting 4.5. Now we’re way past that and the stock market just keeps on chugging along.Next Week SHOULD Be QuieterBased on the calendar, you’d think the market should be quiet. We have no economic data Monday because of the Yom Kippur holiday. And after that, we have some Treasury auctions, Durable Goods, and Michigan Consumer Sentiment. And Costco (COST) is the lone big earnings report. However, it feels like anything could happen with Iran, and at some point, higher bond yields will matter.The Pristine Mentorship Is Open Sami Abusaad and James Rich Young’s Pristine Mentorship is open! (spots are limited) In this video, they take you through the 4 steps to becoming an elite trader.
Continue Reading -->Ethereum Is Going Higher. But There’s a But…
ATTN: Sami Abusaad and James Rich Young’s next Pristine Mentorship is on the calendar for October through December 2026. Spots are limited so check it out. Sami Abusaad owns over 10,000 shares of the Grayscale Ethereum Trust ETF (ETHE). Does that mean it’s time to load the boat? Only if it holds Sami’s key levels: Sami explains: The major breakout in ETHE, and what it means Why there is risk of a major breakout failure How we’ll know if Ethereum will continue higher Why he thinks any breakdown will be survived The key relationships between the daily, weekly, and monthly charts. Yes, this one is nuanced. But that’s exactly why you should watch the full video. Want to learn how he makes these gamebreaking trades? Consider his Pristine Mentorship, which he co-leads with James Rich Young.
Continue Reading -->Why Trading the Pristine Method®? Sami and James Answer.
ATTN: Sami Abusaad and James Rich Young’s next Pristine Mentorship is on the calendar for October through December 2026. Spots are limited so check it out. Why do Sami Abusaad and James Rich Young love Trading the Pristine Method® (TPM). Because it’s logical: The interesting thing is that TPM® is the only trading method James and Sami ever studied. They never bothered with any other systems. Because Pristine worked for them the first time around. And then it kept on working. Want to master TPM®? Consider the Pristine Mentorship, which Sami and James lead together.
Continue Reading -->SpaceX Is Going to $210+
ATTN: Sami Abusaad and James Rich Young’s next Pristine Mentorship is on the calendar for October through December 2026. Spots are limited so check it out. Sami Abusaad doesn’t care about the news. The charts say SpaceX (SPCX) is going to $210+. See why he bought the stock 3 different times recently: Sami goes over: What the monthly and daily chart say about the stock The level that could catapult SpaceX to the $21o to $220 area What could actually put the stock in danger How he handled the IPO His current stop, and how he plans to trail his SpaceX position By the way, here are Sami’s entries from the Number Ones newsletter: As you can see, Sami has trade the stock as a swing as follows August 11: Started the SPCX long at $139.31 August 24: Added at $138.11 August 25: Added at $138.56 And with the stock near $157 on September 17, this “triple long” is up nicely over the past month. Want to learn how he makes these gamebreaking trades? Consider his Pristine Mentorship, which he co-leads with James Rich Young.
Continue Reading -->All Eyes on the FOMC
ATTN: Sami Abusaad and James Rich Young’s next Pristine Mentorship is on the calendar for October through December 2026. Spots are limited so check it out. The action is turbulent into the FOMC tomorrow. Sami Abusaad and JR Romero break down what they’re watching: We go over: Why the market is challenged near-term What OpenAI and Anthropic’s calls to slow AI development mean The technical picture with Bitcoin short-term Where SpaceX may go next Names with high upside potential from here And more!
Continue Reading -->Any Trade With a Stop Is a Good Trade
There was one change that improved my profitability as a trader and had more impact on my account and my life than anything else I’ve ever done. That was my decision in 2022 to stop allowing negativity and pessimism to form my beliefs. Instead, I chose to constantly find something to be bullish about, get long, and let price show me when I was wrong. My initial foray into the stock market almost 20 years ago was not a profitable endeavor, partly due to the fact that my desire for wealth was greater than my skill in attaining it, but largely due to my persistent negative mindset. In retrospect, I can see now what I could not see then: my beliefs were not aligned with winning. I was reminded of my old habits recently while talking with friends who insisted their money troubles were due to “the system” being set up against them. I certainly won’t dismiss their valid concerns about the systematic devaluation of our money, but as I pointed out to them, gold has already compensated us for the risks inherent to our fiat currency system. While, in general, I sympathize with their feeling that the necessities of life are becoming less attainable due to “the system,” what I find far more problematic to their particular situation is a negative mindset, a belief that gaining wealth is impossible, which leads to behaviors that ensure that it is. Once you believe you can’t, you’ve ensured you’ll miss all the opportunities that prove the contrary. I recognized immediately my own former limiting beliefs in their expression of concern. When I believed the system was aligned against me, I traded like it. I took small wins out of fear the market would take them back. I allowed losers to take up long term residency on my position statement because I was certain with a little more time I would be proven correct. I was trading poorly, like someone with all manner of insecurities and unhelpful attitudes towards money and that views themselves a victim of forces beyond their control. Belief is a powerful force that can allow you to see the positive or limit your mind’s eye to only seeing the negatives life brings your way. For reasons I’m still trying to pin down in my middle aged years, my former beliefs in my youth had created a negative bias through which I viewed the world and my trading. With such a negative bias, I wasn’t able to see the market for what it is: an endless stream of opportunities waiting to be exploited and a means to a better life. The way out of this negative bias is simple but not easy; it comes down to a choice each of us, as traders, must make for ourselves. I had to make the choice to trust in my ability to consistently show up, wait for setups I recognize, get in without hesitation, and get out without regrets. Of course this approach required an immense amount of study and practice before I was able to deploy my approach at a large enough scale for professional speculation. My study included analyzing thousands of my trades over many years. The main takeaway from my analysis is this: stops keep my account in tact. I need my account near all time highs to aggressively allocate to whatever trend I find developing. There is only going to be one, maybe two big trends a year that I can take advantage of to pump my account to new levels. There will always be uncertainty as to exactly when a new trend is developing, but with stops, I can limit my risk of loss and try repeatedly to get into what I think is a developing trend. But what is the next trend? All my analysis leads me to conclude that the underlying forces that will create the next trend are building underneath the surface level of index prices we see on the tape. It’s still my view that we are in the contraction phase of the business cycle, and because of this, we should see economic and inflation pressure subside within the next three to six months. That should bring down the long end of the yield curve, but the market doesn’t agree with me right now. I’m not fighting it. I’m letting my analysis of price structure take me out of a losing trade with TLT. Was it a bad trade? Absolutely not. I followed my plan exactly, and I did it in the appropriate size, which has always been my weak spot. As long as I follow my process, I’m not going to get overly concerned about losses. New opportunities will come, and having the confidence to move aggressively when I see a setup I recognize is what will get me in a good trade. For TLT, I’m out with a small loss, but I’ll keep stalking this for a better setup to get long when the market is more agreeable to my view. My account is still within a stone’s throw of all time highs, and I plan on keeping it there. Until I take them out and spend them, the dollars in my account are simply ammunition in my armory that will be needed for battle. A big trend that will pump my account to a new level will come. That’s what the market promises, that prices will always move. When the forces align that move prices in a trend, that is the time to engage in battle. Until that time, I’ll defend my account with small skirmishes that are required to not take any more losing months this year. March was my only down month, and that was due to TLT as well. I’ve had to sell off my positions in fertilizer and energy stocks to offset my loss in TLT for September, but I’ve done so after concluding that locking in good gains is more important than positioning for me
Continue Reading -->This Is the New Palantir
What’s the new Palantir (PLTR)? JR Romero argues it is BigBear.ai (BBAI). And to watch the full interview with JR, you can watch here: In the extended video, JR discusses: Why SanDisk (SNDK) can hit $2800, and then $3400 What to make of Nvidia’s (NVDA) post-earnings selloff Why the Russia-Ukraine conflict could end soon. How the SPX could hit 8,000+ And more!
Continue Reading -->Knowing When To Press Your Bets
Last week I laid out my case for a top in long rates on US Treasury Bonds. This week, I’m growing more confident that an important low in the price of US Bonds has been made. However, I’m still a fair weather fan, so I’ll be out in a heartbeat without remorse if my stops are hit. It’s been my view that we are in the contraction phase of the business cycle, and if that view is correct, we should see growth and inflation expectations start to come down for 2027. This shifting dynamic is what can finally put a bid under US Bonds. This is because there will always be demand for income. When I was running an equity portfolio for a small RIA shop, I had to stretch way out the risk curve far beyond where I was comfortable playing to get the portfolio yield just barely into the 3% figure. I was buying foreign telecom OTC equities to get there. This was during the financial repression of the QE era, and it was not a good time to be a dividend portfolio manager. Today, we are being offered higher yield, even above what I had to stretch for back then, in a money market. You can lock in way higher than that if you are willing to extend duration a decade or more. The TLT, my preferred way to play the top in yields, pays a monthly div of ¢33, about 4.7%. This may not look exciting compared to the gains you can get from a well placed equity trade, but believe me, 4.7% return with no risk is nothing to shake a stick at. The unfortunate reality is that at the moment, there is nothing more attractive than US Bonds for my irreplaceable capital. I’ve been in about 75% cash since March, 2026 when I peeled off the last of my gold miners I was willing to part with (I’ve still got my core position in the big 5 miners) so I’ve been looking for another core position in which to allocate. Stocks are just not attractive other than trades right now because they are all trading at about 20x pretax earnings across the board; no matter what sector you look at, every single stock worth owning trades at basically 20x what you can expect it to earn every year. The only exceptions are the oils like XOM and CVX which trade about 15x and my favorite fertilizer, NTR, which trades about 12x what I estimate is an average of earnings over a cycle. These names can still offer potential for reward with the small chance of an energy or grain price spike, but the risk is shifting to the downside as the Iran conflict seems to be nearing a conclusion, or at the very least, a de-escalation. Any way I analyze the attractiveness of stocks for ownership, I come up lacking any justification for anything other than renting specific names for a trade. In an environment like this, it’s best to just stick with the easy trade, and for me, TLT is the easiest one out there. If the lows of this week hold in TLT, then my focus will shift towards deciding where to add. Proper speculation requires only averaging up, never down. Stan Druckenmiller said the key to his success was forming a trade idea, putting on a position, then really stepping on the gas and levering up when his position started to work. I want to apply the same logic to TLT. The first step is seeing the TLT hold the lows of this week at about $81.75. The next step would be to see some strength above $83. A weekly close above $83 on strong volume would be some indication that it would be time to press on TLT with tight stops below $83. This TLT play feels a lot like my gold trade that won me the ability to trade for myself, but this time, I’m going to apply the lessons I learned from that campaign. I did almost everything wrong during that speculative campaign: I averaged down, didn’t have a trade plan, didn’t use stops, had no risk control, etc. The only thing that made the trade work out for me was size. I was 90% long in one sector because I was confident in my analysis. I used 8th grade math to plot the dollar value of US debt going back 50 years, and used an R-squared regression to get a y=mx+b equation. I plugged in the year 2030 for “b”, and got $45T for our debt. I then took the current portion of foreign held debt outstanding at 20%, and I asked, if even 1% of that dollar value shifts to gold, what would the supply and demand balance look like? It turns out, that at the time I performed this basic analysis in 2023, the new demand for gold would be 4.5 tons at the $2,000 price gold was then, and new supply would be only 2 tons by 2030. It was a no brainer, and the trade worked out. This time around, I’m going to still rely on my analysis that we’re in the contraction phase which means growth and inflation should be coming down, but I’m going to adhere to strict risk controls to put on my TLT allocation. Each time I see a higher low hold, I’ll treat that as a new tactical spot to buy stock to add to my strategic core position. Like Druck’s playbook, if the trade starts to work, then and only then will I add. The reason I can be so confident in my analysis that we are in the contraction phase, is because all the signs I’ve been looking for are appearing. I’m relying on signs to form a checklist approach to pinpointing the turn in the cycle rather than hard data points because a data-driven, statistical modeling approach is notoriously wrong at turning points. Modeling
Continue Reading -->AI Just Went Bonkers
What a week! We had a jobs report, a massive earnings beat from Dell (DELL), and a big Tesla (TSLA) Robotaxi event. So let’s dig in: Skip Ahead! Dell & the Gang Confirmed AI Demand Is BonkersMemory Is Back on TopEuphoria Is Missing In ActionThe Great Rate Debate ContinuesNext Week Is Oracle and Econo-themedThe Pristine Mentorship Is Open Dell & the Gang Confirmed AI Demand Is BonkersNvidia (NVDA) impressed with its incredible guidance on its August 26 earnings report. And Dell (DELL) did the same on Tuesday, forecasting full-year revenues 11% above consensus. We also had strong AI-driven results this week from Broadcom (AVGO), Ciena (CIEN), Snowflake (SNOW), NetApp (NTAP), and Hewlett-Packard Enterprise (HPE). Demand for AI infrastructure is just bonkers. As good as industry earnings are, they’d be even better if not for shortages of inputs like memory and good old-fashioned electricity! Remember, Nvidia guided for 70% revenue growth vs. Wall Street expectations of 44%. But its growth would be more like 100% if it could actually meet demand. And this is a company that is facing increasing competition from its own customers, who are racing to build chips in-house! David Prince of T3’s Inner Circle discussed Dell and other key names in this video: Memory Is Back on TopWith all the bullish AI news, it’s no shocker that memory & storage stocks are leading the market to start September, with the Roundhill Memory ETF (DRAM) up 4%.DRAM has become one of the most popular ETFs in the market, trading over 23 million shares per day. SanDisk (SNDK) in particular had a big day on Friday, up 10%. Maybe we should have listened to Sami Abusaad Tuesday when he made SanDisk his #1 name. Euphoria Is Missing In ActionThe latest AAII Sentiment Survey shows that 39.7% of investors are bullish.This is the first week of above-average bullishness since July 15. So does that mean the crowd is positive? Not exactly. 39.7% isn’t even in the neighborhood of euphoric, and it’s not far from the long-term average of 37.5%. Plus, CNN’s Fear & Greed Index is at just 42/100.This is because many of Fear & Greed’s inputs like new 52-week highs are at historically low levels. Euphoria is missing from this market.The Great Rate Debate ContinuesOn Friday, President Trump told the Fed to cut rates. Or else he’ll stop trade with certain countries that have surpluses. But what is the market pricing in? The CME’s FedWatch Tool shows the market is now pricing in a 58% chance of a 25 bps rate hike this month. And it’s pricing in an 86% chance of higher rates by year-end. Next week’s CPI and PPI reports should impact expectations.Next Week Is Oracle and Econo-themedEarnings season is slowing to a crawl following this week’s biggies like Dell (DELL), Palo Alto Networks (PANW), Broadcom (AVGO), and Snowflake (SNOW). Next week, Oracle (ORCL) is the one to watch for three big reasons: 1) It’s an AI bellwether2) Investors are worried about the company’s debt load3) It will give insights into enterprise software demand But the real action will be in economics with CPI, PPI, ADP Employment, and the ECB rate decision coming in. Not to mention, markets will be watching bond auctions because of ongoing concerns over interest rates and the FOMC.The Pristine Mentorship Is Open Sami Abusaad and James Rich Young’s Pristine Mentorship is open! In this video, they take you through how to build a trading plan, then tell you all about the program. Highly recommended:
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