Nothing New Under The Sun
An AI-driven History Lesson.
“There is nothing new in Wall Street. There can't be, because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”
— Jesse Livermore*
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INTRODUCTION
*Long-time readers may be familiar with this Jesse Livermore quote on Markets & Investing — one of my favorites.
It has never been more relevant.
On Monday, January 27 2025, the Tech world was thrown into chaos after a Chinese hedge-fund released a “game-changing” AI model which supposedly (keyword) cost very little to train and even less to run, compared to leading U.S. AI programs.
Nvidia, the world’s most valuable company (a crown it gave up on Monday’s rout), suffered its biggest decline since the March 2020 Global Crash, plunging -17% in a single day.
The table shows it was the ninth biggest one-day decline in Nvidia’s history:
Students of Market history will recognize most of these dates as taking place within major Bear Markets or periods of global Panic.
Which is to say — the violence of Monday’s decline was quite rare.
And the catchphrase heard ‘round the world was “game-changer”…
But lost in Monday’s headless-chicken-stampede *as usual*, was the fact that there was nothing game-changing at all:
For months, the Market signaled the systematic deterioration and breakdown of the entire Semiconductor group.
At every possible opportunity, I carefully reiterated my concerns, flagging key Stocks as they developed plunge sequences — and prices followed through with vertical collapses.
It was only a matter of time until they came after the leader.
*Link to October 16 Special Report: “Go Into The Light”.
Here’s where those Charts stand now:
Nothing game-changing here — just a major downtrend which still looks to be developing…
As Investors, we should always ask:
→ Do we want to Buy this dip?
→ Does the “news of the day” — and all the associated noise and uninformed takes/calls/opinions, change anything?
My answer to both is: probably not.
NOTHING NEW UNDER THE SUN
Some key statistics for context:
NVDA made zero gains since June 2024 — nearly eight months.
*Then in classic fashion, it was featured in a Barron’s magazine cover in mid-November, near the final Top.
Semiconductor Stocks (SOX Index, SMH ETF) peaked in July 2024 — nearly seven months ago.
The relative performance of Semiconductors peaked in June 2024 — nearly eight months ago.
Since peaking in July 2024, SOX/SMH were already down -10% heading into Monday’s open, while the S&P was up +10% over the same period. An astounding underperformance, in what was widely considered the growth driver/investment winner of our age.
Perhaps worst of all, heading into Monday’s open the average Semiconductor Stock was already down 20% from its 2024 high.
Altogether, Monday’s “uh-oh” moment just cemented the potential early stages of a Bear Market, gradually taking hold…
*One should always be alert for Short-Term rallies, especially after high-volume panic days. But the direction of Momentum was and remains clear for months… Don’t fight the tape.
A LOOK THROUGH HISTORY
Technology Tops take time — and Momentum gradually turns negative, then “all at once”:
Sentiment-wise, everyone is a Long-Term Tech-focused investor — until their portfolio drops 40-50% (*note: even in Bull Markets):
*Related: all we heard on Twitter yesterday were reasons to “Buy the dip”.
If we focus 100% on Momentum signals here, and IF the Trend remains negative (something which no one seems prepared for), then what if:
- Semiconductors are in a standard pullback to long-term chart support?
- Would this be abnormal? And if this is the driving force, how long could it take?
*Note this potential topping structure displays similarities to other important Tech Tops throughout history — including the ARKK, QQQ and NASDAQ charts shown earlier.
(And it could become a targeted, opportunistic Short as the year goes on.)
No crystal ball needed. Just thinking about what is possible — and listening to the Market as it shows us the way.
Stay tuned.
FINAL THOUGHTS: AS THE DUST SETTLES…
Remember that cutting-edge Technology is always extremely volatile, and AI fits the clear profile of a Revolution in its very early stages.
The lesson of history is simple — new Tech regularly becomes a “Love Story”, gets priced for perfection, and inevitably something comes along to disrupt expectations. Then… Momentum turns negative, Investors run off the cliff, and don’t realize it (or accept that the balance of risks may have changed).
With every new Tech, fortunes will be made and lost.
This emerging volatility is now tracking closely with what I wrote in December’s Special Report — regarding the potential risks and opportunities for 2025, and a challenging “Hurricane year” forming.
*If so, reflex dip-buyers could be sorely disappointed, and opportunistic Investors could shine.
Meanwhile, plenty of non-Tech Stocks were UP despite Monday’s rout (nearly 70% of the S&P closed in green territory).
And as the noise level rises, you’re probably hearing from many who “sold everything the day before”.
But remember that in times like these, for the 99.9% of us investing in the real world, “selling everything” isn’t necessary at all.
There was ample time to reduce Semiconductor exposure thoughtfully for months — and at the end of the day, Investing is about adjusting the sails gradually as the winds change.
Focus on the BIG trends and ideas, and the signals that matter — and in the long run, nothing in Wall Street will be new, or change how you Invest.
Thanks for reading.
Onwards and upwards, -MC
Simply superb history lesson. You are a born teacher, MC! Cheers.
Thanks MC! These more "textual" posts are also of great help, and provide insight into your thought processes.