Remember, You Don’t Have to Trade Every Day
Don’t let the itch to stay busy push you into suboptimal trades.
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The July CPI report came in exactly as expected at 0.1% and core at 0.2%. That gave the market a slight lift to start the day but traders immediately sold into the strength.
Breadth is running slightly negative but some strength in data centers like Nebius (NBIS) and CoreWeave (CRWV) and better semiconductor action is boosting the Nasdaq 100. The Magnificent Seven is weak again with a loss of 0.6% which may be a symptom of seasonality. Small caps still have some pockets of momentum but have been cooling.
The mild CPI report caused a drop in the likelihood of a Fed rate hike at its next meeting in September. However, the odds of a hike by the end of the year are still quite high at around 72%, but it was over 80% before the CPI report.
Catalyst Problem Is Showing Up
My concern about this market is that a lack of catalysts combined with negative seasonality would put some pressure on stocks. That appears to be in play on Wednesday morning. The action isn’t bad and traders are excited about the data center and chip action, but it feels slow and thin, and I think it’s going to get slower and thinner in the next two weeks.
I’ve been cutting a few things that are lacking energy. I’d like to buy some dips and pullbacks in names that had good second quarter reports but, so far, there isn’t enough weakness to attract my precious capital.
You Don’t Have to Trade Every Day
One thing I have learned over the years is that you don’t have to find new buys every day. Traders who are constantly watching the market have an itch to stay busy. They ignore overall market conditions and keep pushing to find something to do. They are excited about data centers on Wednesday which is fine and may pay but they should not be blind to overall market conditions.
I find that after a good run it is better to shift gears and focus much more on defense and keeping accounts close to highs. Maybe I’ll miss out by not pressing hard on a day like this but the losses at a turn can pile up fast if you aren’t aggressive in limiting downside.
I’m not bearish but I want to embrace the normal ebb and flow of the market. It has been a great run recently for small-cap biotechnology in particular and my gut feel is that conditions are ripe for greater profit taking.
If you have FOMO at this point, you may want to analyze whether it is justified. Is the market going to run away from you at this point?
At the time of publication, DePorre had no positions in any securities mentioned.
