Progress in the Middle East unravels over the weekend… TSMC’s perfect earnings report fizzles… great reports from the banks go nowhere… how to trade this market
I’m having fun. I know you are.
So said legendary investor 91抖阴 in last Friday’s Flash Alert podcast.
Here’s Louis for what’s behind his good mood:
This has been an incredible week.
Obviously, peace is starting to break out in the world. We got a new peace agreement with Lebanon.
There’s 121 tankers headed to the Gulf of Mexico – excuse me, the Gulf of America – loading up for crude oil.
We’ve got AI enhancements boosting productivity. And hopefully consumers will be spending money now that tax day is over.
I’ll throw in that Louis’ stocks are up more than 10X the S&P’s year-to-date return. Hard not to feel great with that performance.
On Friday, Wall Street was having fun alongside Louis. Iran briefly declared the Strait of Hormuz open to commercial traffic, oil crashed more than 10%, and a deal felt imminent. President Donald Trump said the main points were “basically finalized.”
But then came Saturday…
Tehran reversed course after President Donald Trump refused to lift the U.S. naval blockade – and the Strait went dark again.
Then on Sunday, the U.S. Navy seized an Iranian cargo ship in the Gulf of Oman, the first such incident since the blockade began, and Trump went back to social media, threatening to destroy every power plant and bridge in Iran.
As I write on Monday, Iran says there’s currently “no plan” for a second round of negotiations, even as U.S. delegate Steve Witkoff is reportedly flying to Pakistan for negotiations tomorrow before the two-week ceasefire expires tomorrow night.
Stepping back, the Strait has now been effectively closed for nearly two months – more than 500 million barrels haven’t reached the market, the largest energy supply disruption in modern history. Oil is back to nearly $95 for Brent, up 25%+ since the war started.
Stocks are lower as I write, but not sinking as much as you might expect. It appears the market is banking on yet another last-minute off-ramp.
We’ll keep you updated as Louis and our other analysts weigh in. To get Louis’ updates in real time as a Growth Investor subscriber, .
Please humor me and try an experiment
Take a deep breath – really fill your lungs.
Now pause…
Without exhaling, try to take in another big gulp of air.
Any luck?
I doubt it – you were already full.
That’s essentially what happened with Taiwan Semiconductor Manufacturing Company (TSMC) last week. And it’s telling investors something important right now.
To make sure we’re all on the same page, TSMC is a linchpin of the global AI trade. It holds an estimated 90% market share in the production of the world’s most advanced chips.
While companies like Nvidia (NVDA) design the processors that power AI models, they almost exclusively rely on TSMC to physically manufacture them.
So, when TSMC announced earnings last Thursday, the question was whether it would meet sky-high expectations.
It did – and then some.
Here’s our technology expert Luke Lango, from his Daily Notes:
The AI earnings season opened with a thunderclap from TSMC.
Revenue growth exceeded estimates. Full-year 2026 revenue guidance raised to 30%+ growth. Capital spending guided to the upper end of its $56 billion range. Management’s characterization of AI-related demand: “extremely robust.”
And yet, despite that banner performance, the stock fell more than 3% on the day.
Why?
Because TSMC had already rallied about 20% in the two weeks leading into earnings – effectively “pricing in” a flawless quarter.
That dynamic matters because TSMC isn’t an isolated case.
Through Friday, the Nasdaq has been riding a rare multi-day winning streak. AI infrastructure, semis, and growth names have surged 15% to 25% over the past couple of weeks.
In other words, a lot of stocks have already taken that “first breath” – so even great results during this earnings season may run into problems.
Back to Luke:
In that environment, “strong earnings” may not be sufficient. “Strong” is already priced in.
In the 4-6 week window of the Q1 reporting season, the specific risk is that the market has pre-positioned so aggressively for a strong season that the strong season itself produces a consolidation phase rather than an acceleration.
The short-term risk is real.
Given this, last week, Luke recommended his subscribers take some profits – small, selective trimming of some of their most extended positions (Luke urged his readers to buy near the bottom of the Iran-volatility, so they’re sitting on outsized trading gains).
To be clear, he remains bullish on the AI trade over the next 12 months, so he’s not closing those positions. This is about timing and expectations, not his overall AI thesis.
Here’s his bottom line:
The next four to six weeks belong to patience and selectivity. The summer belongs to AI.
The 12-month bull thesis: as strong as ever.
To follow along with all Luke’s portfolio positioning and market analysis, .
But tech stocks aren’t the only ones sliding after strong earnings
Last week, big banks delivered solid results:
- JPMorgan (JPM) reported $16.5 billion in profit and $5.94 per share on roughly $50 billion in revenue – all ahead of expectations
- Goldman Sachs (GS) followed with $5.6 billion in net income and $17.55 per share, with revenue jumping more than 14% year over year – also better than forecasts
- Citigroup (C) posted its own “double beat” on both earnings and revenues, with its $17.55 EPS crushing the $16.49 estimate
- Wells Fargo (WFC) earned about $5.3 billion, with steady year-over-year growth
- And U.S. Bancorp (USB) delivered double-digit EPS gains.
By any traditional measure, it was a strong showing across the sector – broad beats, solid growth, and healthy fundamentals.
And yet, only Citigroup’s stock climbed the day of its earnings announcement. The rest – like TSMC – pulled back even with strong results.
According to veteran trader Jonathan Rose, the reason why comes down to the same issue Luke flagged…
There’s very little left to surprise the market.
From Jonathan:
By the time results hit the tape, expectations are already embedded in the price.
But this leads to a different way of thinking about earnings season altogether. It’s one that Jonathan uses with his readers to make short-term profitable trades during earnings season.
As he puts it:
Earnings isn’t about prediction — it’s about pricing.”
The smarter way to play earnings season
While the average investor plays earnings by picking a stock and guessing at the post-earnings-announcement direction, Jonathan and the pros employ a different strategy.
They play the difference between reality and expectation.
See, some stocks tend to make big moves after earnings. Others barely budge. Over time, you can see a pattern. Let’s call this the “historical move.”
At the same time, the options market makes its own prediction about how much a stock will move. That’s called the “expected move.”
Here’s Jonathan:
If those two numbers line up there’s no edge. The market has done its job.
But when those numbers don’t line up, that’s where opportunity exists. And I don’t need to guess direction to take advantage of it.
I’m not relying on being perfectly right. I’m putting myself in a position where if the move is bigger than expected, I get paid.
Jonathan and his subscribers use this approach every single earnings season. They don’t try to predict – they just position.
Again, this is how the smart money trades earnings season. It’s not hard – you just have to learn how to do it. But that’s exactly what Jonathan teaches in his . He provides the insights, tools, and general knowledge he’s gained from more than 28 years of trading options.
You can learn more about the .
How to trade when the “why” stops working
TSMC delivers a near-perfect quarter – and the stock fell. Big banks report strong earnings across the board – and most of them sold off anyway.
That’s not random. It’s what happens when expectations get pulled forward and priced into stocks ahead of time. And in this kind of environment, something subtle – but important – starts to break down…
The story.
In other words, the “why?” behind a stock’s gains starts to lose its power.
That’s a tough place to be because when this happens, you can be right about fundamentals, growth, even the long-term outlook – and still be wrong on what the stock does next.
So, if the “why” isn’t reliable, then what should traders rely on today?
A different way to read the market
Here’s an idea…
Stop establishing trading positions based on narratives, and start anchoring them in the stock’s own historical patterns.
This is exactly the approach our corporate affiliate TradeSmith has been developing.
From its CEO Keith Kaplan:
Our new AI-powered system doesn’t look at balance sheets… read earnings reports… or follow news headlines.
Instead, it detects tiny anomalies in stocks’ historical data.
The premise is simple…
Every stock has its own tendencies – its own way of behaving under certain conditions. And when those conditions line up again, similar outcomes often follow.
Importantly, the system doesn’t try to explain why those patterns work. It doesn’t need to. It simply positions investors for the payoff.
Back to Keith:
No one knows exactly why each signal works so well. Frankly, it doesn’t matter.
Our AI finds the what… not the why.
In internal testing, this signals-based approach produced an average gain of 2.6% over nine trading days – the equivalent of a 73% gain across a full year. And that’s compared to just 0.4% for the S&P 500 over the nine-day same stretch.
This kind of approach can be especially useful in today’s market where expectations are elevated, reactions are inconsistent, and even “obvious” outcomes don’t play out the way you’d expect.
Bottom line: It’s a different lens – one that sidesteps the guessing game and focuses instead on repeatable behavior.
Keith will be walking through this in more detail during a live event this Wednesday
At 10 a.m. ET in his , he’ll break down how this signals-based system works, how it scans thousands of stocks each day, and what it’s flagging in the market right now.
He’s also opened up a working version of the platform ahead of the event, so – search stocks, see active signals, and explore how it works in real time.
Bottom line: If this earnings season has felt harder to read than usual, that’s not your imagination. The environment has shifted – and this is one way to adapt.
Have a good evening,
Jeff Remsburg
(Disclaimer: I own TSMC)
