Why I just bought NVIDIA during this "dangerous" correction

While retail traders are panicking and calling this a AI bubble has burst, I just finished scaling into a core position in NVDA. This is a speculative opportunity trade. It might seem counterintuitive to buy when the price has dropped from the $220+ highs of June, but my simple logic is driven by a very specific signals that just fired.

The Setup: A Rare Confluence

We are currently in a CORRECTION regime, which is exactly where "asymmetric wealth transfer" happens. Over the last few weeks, as shown in the chart below, my model lit up with a classic cluster: a BUY_T2 on June 12, a rare CYCLE_T3 on July 6, and another BUY_T2 on July 24.

Why I bought EWY ETF After more than 30% Crash

Markets have a funny way of making you feel like a genius one week and a complete novice the next. While AI and semiconductor-related stocks have been crashing hard over the last few months, the ripple effects have hit the iShares MSCI South Korea ETF (EWY) especially hard, with the index plummeting over 30% from its recent peak. Just last week, we witnessed a stomach-churning more than 10% crash in a mere 10 trading days

For the retail investors who chased the parabolic top near $190–$210, this is the point of maximum anxiety. However, the chart below shows that this "crash" has actually triggered a high-conviction BUY_T2 signal within a Correction regime.

Here is why I’m stepping in to for a speculative trade while others are selling.

The Data: Why BUY_T2 Matters

When the market enters a "Correction" regime, the BUY_T2 signal acts as a mean-reversion re-entry trigger. Essentially, the market has overextended to the downside as shown in the chart below..

I’ve pulled the technical statistics from the backtest below to show you why the risk/reward here is so asymmetric:

Historical Performance: BUY_T2 Signal (CORRECTION Regime)

Metric	Value	What it means in plain English
Sample Size	14 Instances	This signal has appeared 14 times in similar market conditions.
Recovery Rate	100%	Every single time this signal has flashed in a correction, the price has eventually recovered.
Med R60 (60-Day Return)	0.1273	The median profit 60 days after the signal is roughly 12.7%.
Med MAE (Median Pain)	-0.24%	The "Median Maximum Adverse Excursion." This is the median amount the price dropped after the signal before heading up.
P90 MAE (Worst Pain)	0.00%	The "worst-case" drawdown for 90% of the historical cases. Interestingly, in this regime, there was effectively no further drop in 90% of instances.
Med TTR (Recovery Time)	1 Day	The median number of days it took for the price to get back to the "entry price" and start making money.
P90 TTR (Worst Recovery)	1 Day	In 90% of historical cases, the price recovered to the entry point within just one day.

The Game Plan: How I’m Trading this

The market is currently trapped in a cycle of fear because of the rapid 10-day drop. But the backtest tells a different story: a 100% historical recovery rate and a median 60-day upside of 12.7%. I’m not just throwing everything in at once, but in tranches. 

S&P500 Is Still Not Cheap Enough. My Model Found 3 Stocks Are Flashing Buy Right Now

In a recent post-retirement interview, Warren Buffett said this dip in US stock indices is nothing compared to the Great Financial Crisis (GFC) of 2008/2009. And honestly, he's right. Both the Dow Jones and S&P500 have barely dipped below 10% — technically, that's not even a correction, let alone a crash.

Now, regular readers of this blog know I've been working on a model to take emotions completely out of my investment decisions. And I've updated the model to use 2 anchor dates — one for the Macro, one for the Cycle.

For Macro, I use March 2009 (the GFC bottom) as the floor. For Cycle, I use March 2020 (COVID crash) as the floor. Simply put, the GFC low represents the long-term structural baseline, while the COVID low marks the last major cycle bottom. The model then runs the current stock price against these 2 floors and flags whenever price is testing either level.

So what did the signals tell me? Here's what I found.