Momentum, Fear & The Case For Buying The Dip

Market sentiment has shifted rapidly from greed to fear, driving a sharp rotation out of AI and semiconductor stocks despite strong fundamentals. Current headwinds include sticky inflation, hawkish Fed signals, geopolitical tensions, seasonal September weakness, and midterm elections, all fueling risk-off behavior. Historical data shows momentum reversals after sharp corrections, with high-probability rallies for fundamentally strong stocks—making this a key opportunity to buy the dip. Credo Technology (CRDO), Sterling (STRL), Sandisk (SNDK), and Micron (MU) offer compelling growth and valuation stories for investors with conviction and patience.

Market sentiment has shifted rapidly from greed to fear, driving a sharp rotation (0:35) Steven Cress shares why falling stocks like Credo Technology are still buys due to compelling growth and valuation (13:40)

I am very happy to welcome back Mr. Steve Cress to our Investing Experts Podcast. It's always great to talk to him. Welcome back to the show, Steve.

Hey, thank you so much for having me and organizing this. I appreciate it.

I don't know if our listeners know, but you and I have started to talk every single morning right at Market Open. And we have been releasing those conversations on YouTube , TikTok , on Twitter/X . So you and I have been talking broad strokes of the market this past week, last week. And it's a bit of a confusing time, especially as that market then gauges its sentiment on specific stocks, much to the surprise of us passive watchers, intensive observers, etc. How would you articulate what the market is looking like these days?

I feel like when we talk in the mornings, every morning it's been comprised of stocks that have reported results, often results that are good at the stocks are getting slammed. But it's been interesting to talk about these stocks as it's occurring. And I think there's a reason and a simple reason to put forward, the CNN Fear and Greed Index. It's actually a sentiment indicator and it's made up of a number of underlying metrics that are meant to give a view into what is happening with the market in terms of sentiment and there are a number of different options, derivatives, high low indicators in it. And hey it's CNN, but they hit all the major benchmarks that I think are fairly good for sentiment. So that's why I show it and what's really interesting is right now we are at a fear level of 34. A week ago we were in neutral territory and probably about two weeks ago, we were actually in the greed zone. So the markets have changed, but I would certainly say going back way more than just a few weeks, if we went back to the beginning of June, we found that we were sort of in a period where a risk was on the table, and a number of AI stocks and semiconductor stocks were hitting highs. nd It was sort of around that period that a bunch of headwinds started to emerge in combination with a lot of investors and traders believing that AI stocks were overvalued. And it sort of started this period where the SOXX, the Philadelphia Semiconductor Index, which is known as the SOXX Index, is now roughly off about twenty-five percent from its 52-week high. And sort of bringing down, or you know, the stocks that have brought that down are made up of some of the semiconductor companies and AI companies that have had absolutely stellar record results in terms of their revenue and in terms of their earnings, but the stocks have been brought down. So what are some of the headwinds that are out there? We've been dealing with a situation where inflation has been a little bit stickier than expected. And with the new Fed chair coming it, he's actually been a little bit more hawkish than most people expected. So as a result of that, the I wouldn't say th...