After last week’s surprise downgrade of U.S. sovereign credit by Moody’s, traders enter a new week facing one brutal question: Is the bottom in—or is the worst still ahead?
The downgrade sent markets into a tailspin late Friday, wiping out strong early gains on earnings runners like TSSI and SPCE. It’s a stark reminder that even good news can’t save weak markets.
The choppy action continues to frustrate greedy traders. Less is more right now. Singles only. Stay nimble.
The best traders watch more than they trade—especially in choppy markets like this!
A Fragile Foundation: Credit Warnings and Market Reality
Last week’s Moody’s downgrade dropped the U.S. credit rating one notch, citing “persistent fiscal dysfunction and unsustainable debt levels.” This came as no surprise to long-term observers like Warren Buffett, who said at Berkshire’s annual meeting:
“We are operating at a fiscal deficit now that is unsustainable… it has the aspect to it that it gets uncontrollable to a certain point.”
For retail traders, this means volatility is here to stay. And while big headlines about AI or crypto can create short-term supernovas, the broader tape is on shaky ground.
What Wall Street Is Saying
Tom Lee, Head of Research at Fundstrat, struck an optimistic tone, arguing the market is stronger than it appears:
“We’re in a position where [investors] can start to look through some of the messy adjustments. There’s still upside for stocks.”
But not everyone’s buying it.
Adam Parker, former Morgan Stanley strategist and founder of Trivariat Research, warned:
“The whole system’s earnings are too high… and they’re going to come down.”
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He added, “We’re paying for earnings and earning stability that we don’t have visibility on right now,” citing an uptick in companies pulling guidance entirely. That’s not just volatility—that’s opacity, and it’s dangerous for swing traders and investors alike.
Buffett’s $348 Billion Cash Pile: Waiting for the Real Crash?
Perhaps the most sobering signal comes from Buffett himself. Berkshire Hathaway is now sitting on a record $348 billion in cash, and not because of panic selling—but because Buffett simply can’t find any stocks worth buying.
He said:
“We’d spend $100 billion… but the deals just aren’t there.”
In other words, if Buffett’s not buying, it might not be time to back up the truck just yet.
Sector Spotlight: AI, Biotech, and the Hunt for Value
Cathie Wood of ARK Invest struck a hopeful note, pointing out that the cost of AI development is dropping fast:
“AI training costs are dropping 75% per year. Inference costs are falling 85 to 95% annually.”
Her team remains bullish on U.S. innovation, especially in AI healthcare and genomics. But in her words:
“Government spending up closer to 24% is the problem. We need discipline.”
Traders should take this to heart—even tech darlings like Palantir and Tesla aren’t immune from macro risk. This isn’t the time to bet big on hype alone. Stick to your patterns. Cut losses quickly.
Sykes Strategy: Patience, Discipline, and Singles
My top student Jack Kellogg is playing it safe this week, and so am I. We both watched promising earnings plays like KDLY and SPCE fizzle out late Friday—not because the stocks were bad, but because the market environment flipped in an instant.
Here’s what I told my students:
It isn’t about making the most money. It’s about being the most disciplined. The market doesn’t care how good your setup looks—if the environment is shaky, protect your capital first.
I’m still watching PTIX, BCLI, KDLY, and TSSI, but I’m sizing small, aiming for 10–20% singles, and staying sharp.
Final Word: Trade the Setup, Not the Narrative
With uncertainty around Fed policy, tax legislation, and fiscal sustainability, this is not the time to chase trades. We may get a relief rally if earnings continue to surprise to the upside—but until we see clear confirmation, this market demands a scalper’s mindset, not an investor’s optimism.
Stick to patterns. Respect the tape. Cut losses ruthlessly.
As Warren Buffett says, “The world makes big, big mistakes—and surprises happen in dramatic ways.”
I’ll be ready either way. Are you?
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