Market Rally Without News? Here Is What You Need To Know
In a Nutshell
Markets are rallying without clear news catalysts, with major earnings from Meta, Tesla, Netflix, and SpaceX this week serving as critical tests for AI spending sustainability. CoreWeave's $51B debt burden and 25% stock drop highlight risks in the AI infrastructure buildout, while oil markets react to US-Iran developments and potential Middle East tensions. The key message is maintaining disciplined position sizing, avoiding intraday shorting as beginners, and viewing volatility as opportunity only when risk-to-reward ratios favor profit potential over loss exposure.
These notes were generated by AI and may contain inaccuracies.
NASDAQ is up nearly 2% after one of the biggest sell-offs last week. The market is technically on the overbought side after a strong rally. There is not much news driving markets higher. This is not a signal to sell, especially for swing trades or investments, which operate on different timelines than day trades. Markets are technically oversold based on recent time frames, and the speaker has been buying the dip as markets have been selling off.
A short-term trade was executed by buying the dip on Friday. Profits were taken at $2,000 when markets pushed higher. A short position was then opened, which turned against the trader, resulting in giving back that money. The speaker is fully aware of the risk being taken. Beginners should focus on going long rather than taking intraday short positions. Long-term plays are already set up for the speaker and their kids, with enough purchased that the position can be held through volatility.
SpaceX is reporting earnings this week after markets close. Netflix, Tesla, and Meta are also reporting, with Meta expected to be the big mover for those invested in AI. Meta is expected to spend a lot of money, but if it reports spending more than expected, concerns about positive free cash flow could emerge. Micron was purchased last week when it was sub $900 as a swing trade or long-term investment.
Last week, the NASDAQ fell about 4.5% in one of its worst weeks since June. The chip index had its longest losing streak since 2008. CoreWeave, which rents out AI computing power, has more than $51 billion in debt and other obligations. The stock fell 25% last week. Bond yields for CoreWeave have shot up, making the cost of debt more expensive. The cost of insuring CoreWeave's debt through credit default swaps has topped over 10% a year, signaling distress.
Meta reports earnings after the close on Wednesday. Goldman Sachs and five big AI spenders are expected to spend around $1.2 trillion combined into building and equipment next year. Investors want proof that spending will turn into profit. CoreWeave is one of the receivers of that potential spending. The concern is that if Meta spends too big for its revenue, the AI infrastructure buildout could spread problems to smaller players. The analogy used is opening 10 restaurants on credit cards before anyone has booked a table, where hungry customers are not enough if cash does not arrive before payments are due.
CoreWeave has 66% upside potential and is at the core of what AI companies need. If you have a higher risk appetite, buying the dip makes sense. However, position size should be limited so that if Meta reports worse-than-expected earnings or guidance indicating overspending, the position can be tolerated. With $10,000 to invest, buying $1,000 worth provides skin in the game while allowing for additional purchases if the price drops further. Do not put yourself in a position where you cannot tolerate volatility or have no other option but to continue buying.
Intraday shorting is done when the market appears technically overbought. The speaker bought the dip on Friday and Thursday with both personal and kids' accounts, with no intention of selling those shares. The plan is to add more if Micron continues to sell off. Short positions are disclosed for transparency but beginners should not copy this approach. The key is knowing where to cut losses, which is the mistake many beginners make when they end up bag holding.
A breakthrough through the US-Iran agreement could be announced this week to ease tensions. Oil prices began to drop when the announcement was made. However, oil prices then surged as the US warns Americans in 12 Middle East countries to prepare for canceled flights and closure of airspace. Trump has said he is not going to attack until after midterms and has been quiet lately. If Republicans do not win the midterms, the speaker believes Trump will become more aggressive.
Elon Musk announced he will give away one of his SpaceX shares to every kid in America, which would cost about $10 billion worth of SpaceX equity. The speaker questions whether this is an attempt to overcompensate for potentially poor SpaceX earnings being reported tomorrow after markets close. SpaceX is fundamentally not profitable yet, losing $8 billion a year with a negative 223 P/E ratio and no road to profitability. The speaker's kids are invested in SpaceX at around $118 per share. There is no reason to sell now, and even if it sells off further, there is no reason to buy more. SpaceX is early-stage and possibly set to merge with Tesla.
Market conditions are favorable for rational valuations right now. Always consider the worst case scenario. Position sizing should ensure profit potential significantly outweighs potential loss. A one-to-one risk-to-reward ratio is not worth it. Tolerance is critical since things can get worse before they get better, especially with the current administration. Beginners should not short. Overtrading by going from short to buying the dip repeatedly leads to mistakes. Stay patient, be intentional, be selective, and have some exposure but not too much.
Fear presents more deals and opportunities. Only those who did not prepare will get shaken out. Being well positioned allows you to welcome fear because it presents better opportunities. Position yourself to succeed by watching position size, taking risk-to-reward into account, looking at different time frames for perspective, and ensuring potential for profit is significantly greater than potential for loss.
Keep Ricky Gutierrez in your library
Save the videos and channels worth coming back to, and find them again in one place.
