Lots of News But Little Reaction as Market Yawns

The action was slow with a negative bias on Monday. The Nasdaq 100 (QQQ) lost 1% and the Russell 2000 (IWM) fell 0.7%, while the S&P 500 (SPY) slipped 0.3%. The Dow gained 0.3% on strength in Visa (V), Walmart (WMT) and Disney (DIS), and the Magnificent Seven finished down 0.1%.

Breadth was only 42% positive. The positives were lower oil and a bounce in bonds. The negative was another 2% decline in the semiconductors, with Nvidia (NVDA) falling sharply ahead of its report Wednesday, which tells you there is some nervousness about that event.

Note where the Dow strength came from. Visa, Walmart and Disney are not growth names. That is the same defensive rotation that we saw on Friday, and it is the reason the senior index looks OK while the Nasdaq loses a full 1%.

Big News, No Reaction

What stood out was how little any of the news mattered. Treasury Secretary Bessent announced sanctions on Iran that extend to any country doing business with it, saying nations with ties to the regime will be removed from the U.S. dollar system. The obvious target is China, the primary buyer of Iranian oil.

Separately, the U.S.-Canada trade talks broke down over the weekend, and new tariffs were imposed. There was also a report that Treasury may use its General Account, which holds close to a trillion dollars, to fund the bond buybacks.

Any one of those would normally cause some market movement but all we saw on Monday was a yawn. Part of the reason for that is Nvidia. Nobody is repositioning two days before the most important report of the quarter. The rest is that it is the last week of August with the trading desks half empty.

That does not mean the news does not matter. It means the reaction is being deferred. Everything announced this week gets priced when people come back and start making decisions again, which matters when September produces a move that looks larger than whatever headline triggers it.

Random Movement Is the Real Risk

There is not much to do here beyond staying patient and managing the positions you have. A market like this produces a great deal of random movement, and random movement is what shakes people out. A stock drops 4% on nothing, you convince yourself something is wrong, and you sell into what turns out to be noise. Then it recovers the following week without you.

The reason that happens has almost nothing to do with analysis and almost everything to do with size. If a position is too large, a routine move becomes a problem you have to solve rather than a move you can ignore. You end up making a decision the market forced on you at a moment when there was no new information.

This is why I keep coming back to sizing. If a 4% decline in one of your holdings creates a high level of stress, then that position is too big for these conditions. The fix is to change position sizing, and that’s possible now while the market is quiet, rather than later when it is not.

Game Plan

My positioning has not changed. Cash is high, I am selective, and I am content to let a slow week be slow.

Nvidia (NVDA) reports Wednesday and Kevin Warsh speaks Friday at Jackson Hole. Between now and then there is very little to do. The setups I want will develop out of whatever volatility those events produce, and the capital to buy them needs to still be there when they do.

Have a good evening. I’ll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.