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[Applause] Let's first talk about the current market environment. Mark, what are your thoughts on the action we're seeing out there? You mentioned at the top of the show you're seeing a number of stocks out there that are looking interesting. You've made a number of recent new buys, so talk to us about the market environment.
Uh, yeah, there's a lot to talk about actually today. I think, first of all, if you remember last time I was here—I believe it was the last time I was here, maybe a couple times ago—I talked about how the VIX hadn't doubled or tripled in a long period of time. And we finally got that. We got a doubling and a tripling of the VIX. We got this spike in volatility, and it was looking like potentially that was the start of a big, even a bigger correction. We came off 16% in the NASDAQ, about 10% in the S&P 500, and that's about normal. But we've had a really quick recovery.
And during that recovery, a couple things have happened. First of all, just the fact that the S&P recovered so quickly historically bodes well for future returns, although we haven't gotten into new high ground officially here and really broken out to the upside. But it's looking constructive. That move up, that right side, had some follow-through days, some accumulation days, where price was higher than the previous day on an increase in volume, although not really above average. That's the one thing I would like to see: that volume a bit more.
But the AD line—the Advanced Decline Line, NYS AD line—hit an all-time high. And also, we had about a 1.8 to 1, 10-day AD line, what we call the "thrust." 1.91 is sort of the threshold for a buy signal. Some people use 2 to 1. That goes back to Marty's Wag at one time, and Ned Davis Research did that work for Marty's Wag, and they used the 2.0. We used 1.91. And so, there's been some pretty good action here. The main thing: we've got stocks that have been setting up, and we've got some stocks that are starting to work coming out of bases. So, so far, it looks constructive.
And we're still on, as far as the S&P 500's concerned, we're still on our January 13, 2023 buy cycle. Usually, I'm going into the leading stocks, the better names, and then that leads me to the better groups. I tried it the other way around; it didn't work very well back in the '80s and '90s. Well, in the '80s, pretty much, is when I started. I was doing the quant work, and I'd start with the market, then go to the group, then to the stock, and I was always missing the leading stocks. So, I flipped it around backwards: stock, group, market.
And that's what I was just talking about before. You know, I usually end up, sometimes I'm investing in the market even before we get a follow-through day, simply because the stocks are setting up, and I'm buying the leading stocks that bottom first and very often break out right off the lows of the market. So, that's the situation with this type of group. AI, any of these groups that are hot, I'm hoping to be in the groups well before it's widely recognized and the group is hot.
Particularly in a correction or a Beer Market Market, that's when you want to use the "blue dot." That's when you want to use the market surge—you know, the "blue dot" reference—or even the RS line hitting new highs. That's when I'm looking at those stocks that are getting RS lines or hitting new highs when we're in a correction and particular Beer Market Market, because those are stocks that are resisting the down move, and they're building their bases. And even though they might not even be going up, they're going down less than the market, or they're moving sideways. And that's where you'll find some of your new leaders.
And again, if you look at the IBD 50, you'll see you're building that right side. The QQQ, you're building these bases where you're seeing this right side tighten up, and that's where you're going to see a lot of individual stocks set these pivot points. And this is where, basically, I get to see everything I need to see. If these stocks start breaking out of these bases and I see a proliferation of ideas, I get some traction. That's it. I start bumping up the exposure and getting aggressive. If not, and they start falling apart, then I cut, you know, "cut and run."
So, this is, we're at that point where we're getting to that inflection point where you should start to see—and this is again, knowing when that train is coming in on schedule or not. But to know that, you have to know when the train's supposed to come in. If you're sitting at the train station, and the train is supposed to come in at 6:05, if it's 8:00, there's something really wrong, right? But so, at 6:10, it doesn't mean anything because it's not that late. But you have to know that the train's supposed to come in at 6:05.
And that's why we use charts. That's why we use precedent. That's why we follow these stocks and watch their character to understand, have reference points, and to know what's supposed to happen. O'Neil said, and I'm not sure if he said it in his book, but I heard him say it personally, and he said that "you don't have to know what a stock is going to do. All you have to do is know what it has done." And that was echoed from Livermore as well, and I've built an entire career and a fortune on that concept.
My stock might have stopped you out, and maybe you got in it prematurely, but the fundamentals are still there. The stock is acting right. Again, many, many of the names that I've made big money on were stocks that stopped me out two and three times prior, and then I went back to it. You've got to look at it as sort of like playing aces. Aces are a 70-plus percent hand pre-flop in a game of no-limit hold 'em. If you lost three times in a row, would you not shove in with them next time? Of course you would. The odds are the same. So again, don't walk away just because the stock maybe isn't acting right in the short term, as long as there are not some major violations and it's holding up well. Look for that re-entry.
Retail buying is not going to move a stock very far. We need institutions. So, that's what we're always trying to gauge: whether the institutions are in there supporting the stock. And that's that normal versus abnormal. Those are those footprints. As a matter of fact, in my second book, "Thinking tra Like A Champion," there are the various indications, if you will, or action—price action—that we look for for confirmations and violations. So, when violations are piling up, that means it's not acting normal. When confirmations are piling up, then the stock's acting well, and I'm holding or adding.
Those confirmations and violations are something that myself and David Ryan use, and I used to talk to David Ryan pretty much on a daily basis on Skype, and we developed a lot of these things together. And so, it's a great section of the book to read if you want to understand normal action from abnormal and have some concrete, mechanical things to look at.
You know, I like to back up a little bit and look at the bigger picture. We've had, I think, this is the most anticipated, telegraphed Fed rate cut that I've ever seen in my entire time trading in 41 years. I don't know, Mike, if you would agree with that. But this is, at one time, you know, there weren't Fed statements, and you didn't have all this sort of posturing and language. It would just, you know, you'd be trading one day, and all of a sudden they'd say, "The Fed cut rates! Holy cow!" And everything just exploded. They just surprised you. And I wish I would go back to that, actually.
But, you know, language is now policy. And so, this language has been going on for quite some time. And if you look at the probabilities, it's like 100%. The probabilities are right now that the options market, and you know, the markets, are pricing in. So, I have to think that maybe we have a "sell the news" situation, or maybe a quick blowoff on the news, and then you sell the news. So, I'm a little suspicious going into the rate cut, at least maybe short term.
But presidential cycle, if you look at the cycle work, the seasonal work, the various cycles, and you look at the presidential cycle, its tendencies are for a strong second half of the year and a strong first half of next year. Now, I don't think I've ever seen as bizarre a presidential election either. So, there are a lot of distortions. You know, there are some things, people always say, "What has changed?" Really not much. Things move a bit faster. We've got technology, and some like maybe the Fed using language. But the supply-demand doesn't change: earnings, sales, all the things that we look at the individual companies.
But I think we've got to look at the fact that COVID distorted a lot of things too. You've got now unemployment moving up. Unemployment—usually the unemployment rate—usually moves inverse to the market. We've had virtually every indicator you could think of that has preceded every recession going back to postwar has pointed to a recession. So, that would point to a potential bear market. But again, COVID got things really out of whack. That was similar to what happened around the time around World War II, where there were some distortions because of what was happening in the country. So, things aren't as normal as they were maybe in certain periods.
So, this is where again, I'm going to circle back to the stocks. That's why to cut through all this noise, I'm not smart enough to figure all that out. I don't think any of us are. But I do know when a stock's coming out of a base. I do know what a company looks like, and what it's supposed to look like for a biotech and for a turnaround situation. And I can control my risk with stop losses and position sizing. And if those trades are coming out of bases and they're working, then I'm going to go into the market regardless of what I feel about rate cuts and economy and all those things. And that's how I cut through the noise. That's how I cut through the noise.
You know, I have a good—I started as a macro analyst—and I have a good feel for the big picture, and I look at all this stuff and I discuss it every week with my customers. But when it really comes down to it, I'm focusing on those individual stocks. If those individual stocks are setting up and they're working, I'm getting aggressive.
And the key is that you want to have a system, regardless of what system you use. You want to have some mechanism that forces you to be trading your largest when you're trading your best, and your smallest when you're trading your worst. So, that's where "Progressive Exposure"—something that I've termed years ago—where as trades are working, I'm getting bigger and I'm getting more aggressive, and my position sizes are getting bigger. And then when they go against me, my stops are getting hit. A lot of traders go in there; they try to revenge trade, they take bigger positions, they try to get it back. I do just the opposite. I'm getting really small, and I want to inch my—especially if I get at a loss—I want to inch my way back very slowly and very carefully, because I don't want to have a big loss and get into a hole. Because then, when the opportunity comes, all you're doing is digging out of a hole back to break even, and you never make any progress.