by Ivan Martchev
June 9, 2026
“Told you so” does not work in financial markets. Nobody knows ahead of time the precise date when an index will top out, or the precise date it will bottom. All we can do is recognize extremes – both to the upside and the downside – and then look for signs of a top or a bottom and act accordingly.
We must always beware of false signals along the way. Such is the nature of markets.
Realizing these caveats, I did go into detail as to why the stock market became the most overbought since the bull market began in October 2022. The NASDAQ 100 index was even more overbought last month than in June-July 2024; the previous extreme overbought reading (see 5-19-26: Quantifying a “Normal” Correction. I did not know when an intermediate top would come – all I knew was that we were close).
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The RSI oscillator made a lower high as the index made a higher high last week and one of the triggers was Broadcom (AVGO), whose CEO was not seen as being super bullish on the conference call, despite being positive about their spectacular earnings. As far as I am concerned, being restrained does not justify panic sales. Caution or restraint is a sign of prudence in a CEO, but the market has other ideas. Go figure.
We had a similar lower high on the RSI and a higher high on NASDAQ 100 (NDX) in 2024 (see below).
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As I said before: Ask ChatGPT ‘What is RSI when it comes to stocks’ and you will get a pretty good answer. That way I will have more time going through my base-case, best-case and worst-case scenarios.
Sell-offs happen because stocks can rise too fast before they mean-revert to a more sustainable growth rate. Stock prices appreciate over time as earnings and revenues grow (see the S&P’s EPS chart in last week’s post). If stock prices dramatically rise above sustainable revenue and earnings multiples, then prices tend to mean-revert more violently. We are experiencing such a violent mean reversion now.
As I wrote recently, I thought the SpaceX IPO would mark the short-term top. Instead, it was Broadcom, with the CEO’s restrained (not overly bullish) comments. Despite that apparent trigger, the sell-off can still be partially driven by SpaceX, as investors needed to raise money to get into that IPO this Friday.
Someone said it would be no problem for SpaceX to raise $75-billion, as Google just raised $80-billion in a secondary offering. If that isn’t the proverbial apples-and-oranges fallacy, I don’t know what is. Google is a well-established company with massive cash-flows. It is spectacularly profitable and has a massive 15% stake in Anthropic to boot – in addition to its own very well-executed AI initiatives.
Google does not trade at crazy P/E or revenue multipoles, as SpaceX will when it debuts on Friday. The IPO take-in is right now $75-billion, and the implied market cap is about $1.75-trillion at that price. No matter how high SPCX stock rises above that price, I would not touch it with the proverbial 10-foot pole.
Most IPOs decline below the IPO price at 3, 6 or 12-month intervals after their debut. I don’t know if the same will happen with SPCX, but high-multiple stocks in the middle of a correction tend to become lower-multiple stocks. I think SpaceX will be successful, but I also expect it to trade at crazy multiples with very high volatility, both up and down, for years before it builds its first base on the Moon or Mars.
Because the S&P committee declined to put SpaceX in the S&P 500 before it completed the necessary profitability metrics, I must cite the explosive gains in Tesla before it entered the S&P 500, not after. The reason for those explosive gains is that it debuted as a small-cap company and grew after going public.
Now, here is an interesting comparison (via Google’s Gemini):
At its initial public offering (IPO) price of $17 per share in June 2010, Tesla’s market capitalization was approximately $1.7-billion. The IPO offered 13.3-million shares and raised roughly $226-million, resulting in an initial fully diluted valuation of roughly $1.6 to $1.7-billion at the offering price.
$1.7-billion (Tesla) versus $1.75-trillion (SpaceX) is quite the difference. I have no problem with people buying SPCX and holding it while Elon makes Mars his permanent residence, but not this Friday and not if the IPO rises dramatically above its IPO price of $135 in the middle of an intermediate-term correction.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Cerebras Systems (CBRS) is an extreme example of a smaller company that had (and still has!) an insanely high revenue multiple at the time of the IPO, and it illustrates the point well. Its IPO price was $185 per share on May 13 and it reached $386.34 on the first day of trading. Last Friday it traded back down to $196.73. I think the odds are at least 75% that it will break below its IPO price before this correction in the market is over, which is to say sometime in June. I will update this chart at the end of June to see by how much it declines below the $185 IPO price – and I think the same can happen to SPCX .
With all those caveats in mind, here are three scenarios – my base-case, best-case and worst-case scenarios for the stock market and NASDAQ 100 Index – the favorite of index for many investors.
Base-case: The Iran war temporarily reignites, sending oil and bond yields higher, pushing indexes lower for 2-3 weeks. The key is the Iran war not going out of control – and being settled during June.
Best-case: Most of the decline is behind us and we stabilize this week or next due to an Iran peace deal. Oil and bond yields will decline. The lows of this sell-off will be capped near the May lows.
Worst-case: The Iran war goes out of control, oil begins to trade above $120 per barrel and the 10-year Treasury bond yield reaches or breaches 5%. In that case, the whole rally unravels.
I don’t believe the White House wants to see this worst case war scenario, but I am pretty sure Israel would rather go that route, based on their recent statements, and Iran may be considering it. Israel views Iran as an existential threat and would rather do more damage now when so much U.S. firepower is in the Persian Gulf (see New York Times June 6, “Pentagon Sees Growing Espionage Threat from Israel”).
I am inclined to lean toward the base-case scenario, as I can see the Iranians dragging their feet and the Israelis itching to go after their more localized threat, the Hezbollah in Lebanon (an Iranian proxy which is not playing ball). Iran knows the mathematics of oil and knows the longer the Strait of Hormuz is mostly blocked, with oil not flowing at a maximum rate, the pressure on the U.S. will keep increasing.
It is a high-stakes geopolitical game of chicken that has trillions of dollars of investor assets on the line. Factset reported Q1 EPS growth at 28.8% for the S&P 500. For Q2 EPS growth is estimated right now to come in at 21.7%. If we do not get a worst-case scenario derailing the U.S. economy, that kind of earnings growth will help the stock market recover – and then some.
Navellier & Associates; own Alphabet Inc. Class A (GOOGL) and Broadcom (AVGO) in managed accounts. A few accounts own Tesla (TSLA) per client request. We do not own Cerebras Systems (CBRS). Ivan Martchev does not own Alphabet Inc. Class A (GOOGL), Broadcom (AVGO), Tesla (TSLA), or Cerebras Systems CBRS) personally.
All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Bears Were Caught Short in This Booming Market
Income Mail by Bryan Perry
Mr. Market Is Sorely Misreading the Employment Data
Growth Mail by Gary Alexander
Gold is Down $1,000 Since January: Is the Gold Bull Market Over?
Global Mail by Ivan Martchev
Friday’s Sell-off Was Bound to Happen – What’s Next?
Sector Spotlight by Jason Bodner
When Sidelined Cash Goes Looking for a Home
View Full Archive
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Ivan Martchev
INVESTMENT STRATEGIST
Ivan Martchev is an investment strategist with Navellier. Previously, Ivan served as editorial director at InvestorPlace Media. Ivan was editor of Louis Rukeyser’s Mutual Funds and associate editor of Personal Finance. Ivan is also co-author of The Silk Road to Riches (Financial Times Press). The book provided analysis of geopolitical issues and investment strategy in natural resources and emerging markets with an emphasis on Asia. The book also correctly predicted the collapse in the U.S. real estate market, the rise of precious metals, and the resulting increased investor interest in emerging markets. Ivan’s commentaries have been published by MSNBC, The Motley Fool, MarketWatch, and others. All content of “Global Mail” represents the opinion of Ivan Martchev
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