Happy Tuesday, traders…
Jeff here.
There’s a lot of erratic movement in individual stocks right now, but the broader market keeps grinding…
That said, I’m not looking to make any big moves this week as the market is closed for July 4 and I expect volume to be light (more on that later)…
With a potentially slow week ahead of us, I want you to start thinking of yourself like a boxer…
If you’re always throwing punches that miss, you’re wasting precious energy. And you won’t have enough juice left when the ideal opportunity to strike presents itself…
The same goes for trading. Precious brainpower and capital go into forming and executing every single play.
If you use these resources when the market isn’t playing into your strengths, you’re wasting opportunity cost.
But that doesn’t mean you can fall asleep at the wheel over the next few days…
With that in mind, let’s get to my Tuesday Market Outlook…
The Semiconductor Shakeout
The semiconductor sector remains in focus…
Although Nvidia Corporation (NASDAQ: NVDA) has taken 15% off its high near $140, the sector is still incredibly frothy.
This earnings season has revealed a pattern: NVDA is the only chipmaker significantly outperforming in its earnings.
Meanwhile, competitors like AMD, ARM, and Micron — all touted as potential contenders for the throne — are falling short.
This kind of disconnect often occurs late-cycle in what I call “bubble sectors,” and right now, AI and semiconductors are very much in a bubble.
I think it’s clear that semiconductor stocks are overbought. But the media keeps pumping NVDA…
It’s almost as if the entire financial news media is coordinating an endlessly bullish narrative around NVDA…
Be wary of this narrative. You need to be very selective with the stocks you trade when the market environment gets this single-minded.
And few tools can take advantage of this unique backdrop like my brand-new AI trading system, The Gamma Code…
The Gamma Code
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The Truth About Summer Trading
Last but not least, let’s talk about summer trading.
There’s a FOMO mentality that new traders often have, believing they need to make a certain amount of money every single day without considering the broader context — the time of year, the day of the week, or what’s happening globally.
This relentless drive can lead to poor decision-making and unnecessary risks, especially during periods when the market’s behavior deviates from the norm.
But I don’t want you to think this way, especially as we approach July.
Here’s what happens with summer trading…
- The big players on Wall Street head off to the Hamptons, Europe, Palm Beach, and California, and they don’t trade in large volumes.
- The summer months typically lack major corporate and economic announcements. Most companies have already reported their earnings for the previous quarter, with the next round of reports coming in the fall.
- Summer is when hedge funds and institutions rebalance their portfolios and adjust their strategies. These adjustments often lead to more cautious and conservative trading approaches from Wall Street, further dampening market volatility.
This seasonal slowdown leads to lower trading volumes and less liquidity in the market, which can result in erratic price movements and reduced opportunities for significant gains.
Without size, there’s no volume, no real flows, and no massive sustainable moves. Instead, you tend to get a lot of choppy, difficult trades.
The lack of significant market participation from institutional players means that price action is driven more by retail traders and smaller market participants, leading to increased volatility and unpredictability.
This week is likely to be light on volume because there’s a major holiday in the middle of it.
There might be some action before the break on Thursday, but right now, it’s crucial to keep your stops tight and your inventory fresh.
You don’t need to go all in right before a holiday in the middle of summer trading. Take the opportunity to go outside and get some fresh air.
Summer is the perfect time to step back, reassess your trading strategies, and enjoy life beyond the screens.
Balancing work and relaxation can lead to better decision-making and a more sustainable trading career in the long run.
Have a great holiday,
Jeff Zananiri
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*Past performance does not indicate future results
