Hey trader,
The S&P 500 is down about 5% from its peak. That number sounds gentle.
Open your own account and the story is uglier. The names retail actually holds are not down 5%. They are down 30%.
That gap, between the calm index and the carnage in your portfolio, is the whole point of this letter.
I have lived this from both sides. I have held the speculative high-volatility names. I have watched a small index pullback take a third of their value while the headlines stayed quiet.
Let me show you the math behind the damage, the names showing it right now, and one personal check I run that has saved me more than any indicator.
The Math Nobody Warns You About
I have shared this before. It holds every time.
When the S&P 500 falls 5%, the stocks most retail traders hold are down closer to 30%. Push the index down 8% and the average Nasdaq name might be off 45%.
That is not a guess. We watched it happen in 2022.
The reason is leverage and volatility. The high-flying names move several times harder than the index. A small slide at the top becomes a gut punch at the bottom.
This is why the tape looks healthy while your account bleeds. The index is the average. Your portfolio is the extreme.
Look At What Is Actually Getting Hit
The names doing the damage are the ones people stepped into hardest. ASTS peaked near 133. It sits around 88 now.
That is roughly $42 gone. Over 30%. On a 5% move in the S&P 500.
RGTI tells the same story. It ran to 28 and printed a low near 18. Another drop of more than 30%.
These are the speculative, high-short-interest stocks retail crowds into when the market feels easy.
I do not see real panic underneath this yet. What I see is people selling at market in their highest-volatility names. They are dumping the stuff that ran the most.
That matters. A washout clears the sellers all at once. It often lays the kindling for a sharp snapback. We have not had that. The selling so far is steady, name by name.
The Personal Check I Run
Here is something I have leaned on for years. I take my own positioning and psychology and use it as a read.
It is not a signal to trade off of. It is a gut check. I ask whether the market is agreeing with how I feel or arguing against it.
Right now I have done a lot of work on the S&P 500. I have not done that work on the speculative single names.
So I ask myself one question. If I am no longer interested in holding those names, what does that say about them.
That is the discipline I would pass to you. When a stock you loved at the highs no longer tempts you near the lows, that feeling is information.
Do not bet on a snapback in a name just because it fell far.
What To Carry Forward
A 5% index move is not a 5% problem for most accounts. It is a 30% problem in the names retail loves. The index will keep hiding that.
The rotation away from high beta has not turned back yet. Until it does, betting on a violent recovery in the hardest-hit names is fighting the current.
Protect the account first. The downside in these stocks runs far deeper than the index lets on. Chasing the bounce is how good traders give back their discipline.
I am watching for the washout that resets this. Until it shows, I would rather hold cash and respect the carnage than guess at the bottom.
Brandon Chapman, CMT
Creator of Ghost Prints
