Big Tech Is About to Report. My Plan: Do Nothing
The Invesco QQQ Trust ($QQQ), the chips and data center names, and Tesla ($TSLA) are showing mild strength on Tuesday. Tesla ($TSLA) is giving the Roundhill Magnificent Seven ETF ($MAGS) a boost. Elsewhere, the action is listless, and breadth is negative. Only a handful of names on my scan were up 10% or more, and 30 minutes into the session, almost nothing was trading at its day’s high.
The market is digesting the fact that the big AI names are finding ways to finance their capital spending, as we saw with Broadcom’s ($AVGO) guarantees for Anthropic. The money is there for the strongest players. What isn’t settled is whether all that spending will ever be profitable enough to justify it, and those doubts are what is holding back a more robust bounce.
The reports from Microsoft ($MSFT), Alphabet ($GOOGL) and Amazon.com ($AMZN) over the next few days will go a long way toward deciding how this plays out, and we hear from the Fed on Wednesday as well. I see no edge in trying to bet on those outcomes. My focus is on being ready to react to whatever unfolds.
In other words, I’m doing little other than holding some longer-term positions and keeping a high level of cash. I’d love to buy aggressively, but there is no edge right now.
The Skill Nobody Talks About
This is a good time to reflect on one of the most important skills a trader can have. Great traders can stay patient for long stretches and then act aggressively and with conviction when the time is right.
There is a misconception that great traders are always active. That isn’t true. The traders who always need to be doing something tend to have a gambling mindset. They need the action for entertainment, and that need overwhelms the strategic value of doing nothing for long periods.
Jesse Livermore’s story in “Reminiscences of a Stock Operator,” published about a hundred years ago, put it best: “It never was my thinking that made the big money for me. It always was my sitting.”
If you want action, you can trade in short time frames, but you aren’t going to make substantial returns that way. The big returns come from aggressive position trades that play out over weeks and months. Those trades only come along when the conditions line up, and if you have spent your capital and your energy on low-quality trades while you waited, you won’t be ready to act when they do.
A day like today makes the choice easy. The scans are empty, nothing is pushing to new highs, and the biggest catalysts of the season are a day or two away. Forcing trades here isn’t discipline. It is boredom.
Game Plan
I’m not doing much right now, but I am looking at post-earnings possibilities. Amazon is at the top of that list. If the stock sells off on spending worries while the cloud business keeps growing, that is the kind of overreaction I want to buy. If the reports drive the broad buying that’s been missing, I’ll have plenty of cash to put to work.
At the time of publication, DePorre was long AMZN.
