The Midterm Market Lie: What You Need To Know Right Now
In a Nutshell
Markets are likely to stay weak until after midterms, but the real risk is a post-election oil supply shock if Trump escalates with Iran, which could push prices sharply higher. The best approach is to average in now on quality companies with small, manageable position sizes rather than trying to time headlines or overcommitting before volatility hits. Oracle's aggressive $20B debt raise signals over-leveraging in AI, which could trigger broader market damage if it unravels.
These notes were generated by AI and may contain inaccuracies.
With midterms being tomorrow, is now a good time to start buying the dip on good companies or should I maybe wait until after midterms to see how the markets react. The midterm effect is mostly a myth. Studies going back decades show no reliable pattern in stocks around election day itself. What actually moves things is the policy uncertainty that comes after, and that's slower to play out. If you like the companies, the cleaner move is probably averaging in now rather than trying to time a headline.
A concern exists that Trump has been waiting to attack Iran leading up to midterms. Once midterms are over, if the Republicans do not win, Trump can begin to unleash a series of attacks which can further exacerbate all the oil issues. That's the real risk premium sitting in oil right now. Brent's down 6 or 7% today despite the tanker incident and the embassy explosion report, which tells traders are leaning toward deescalation for now. The question is whether that calm survives a Republican loss. If it doesn't, you'd be looking at a supply shock on top of an already tight market and that's when the dip becomes a freefall.
The thesis on companies would expect attacks to come because that's all they've been talking about waiting for. There are a lot of companies right now that are a decent deal already where averaging into them could begin. Even if markets do sell off after attacks, position size needs to be mindful.
Position sizing is exactly the right lever. You can always add after a shock, but you can't unbuy what you overcommitted to before one.
Oil is down a pretty significant amount after the US and Iran are nearing a deal. Iran announces on Monday that the country is open to the possibility of reopening the Strait of Hormuz within two days if the US is met with its demand, which includes ending the Middle East war on all fronts, unfreezing Iranian assets abroad, lifting sanctions on oil sectors, and ending the US naval blockade, which of course hasn't actually been met. As of right now, the idea of this deescalation is what is really exciting a lot of the market. Oil is reacting in a negative way because they're desperate for a deescalation. Markets are in the green, but it seems like they're really not buying it due to the uncertainty.
The NASDAQ market is testing a critical support range here, right around the lows of like 690. If we break that support, then we have the gap down to the lows of 680. Markets have been forming these lower highs, lower lows.
Apple reporting earnings after the markets close. Palantir earnings are also scheduled.
Tomorrow are the midterms and depending on who wins will determine if the attacks continue or if we continue this deescalation. Your guess is as good as anyone else's. Do not make impulsive decisions.
Oracle is preparing a $10 billion bond across six trenches just days before telling investors that it would limit additional debt to the same amount through 2030, effective frontloading its entire borrowing plan. Oracle is diluting its investors with another $10 billion raise on top of this $10 billion bond sale. Oracle is such a nasty performing stock for a reason. They're just heavily and aggressively getting more and more into debt. Every bubble, there's always just one player that needs to pop. If Oracle and its debt begins to unfold and it actually leads to this company actually beginning to struggle, it's just going to be so stupid to see that. There is no question that AI is so valuable, but to see companies like this overlever themselves in positions that do seem to be unsustainable. If it doesn't end up paying off for them and they do begin to default, everything will get impacted in a negative way.
BTC is back up to 77 almost 77 and a half. Markets are fine. They just look weak. Markets tried to recover in the morning and they just look weak. It looked like an absolute bull trap. They got rejected. They're hugging this support range and if we break the support range, we're going to trade lower.
Micron stock was bought earlier today, and when it began to uptick, it was sold because it's forming these lower highs, lower lows. A few hundred dollars were made there. A small little short position on INTC as this thing is selling off and forming lower highs and lower lows, up a little bit over $3,000 on the day on that one. Over $4,000 on the day total.
If you are a beginner, do not be shorting. Shorting comes at a greater form of risk. Markets are more bullish than bearish. Even in the short term, if markets do produce another leg down, if you are a beginner and you are not the best at managing or mitigating risk, you are still better off buying the dip on good quality companies, putting yourself in a position in which you can tolerate. Not going all in, not using margin, not using leverage, but buying good quality companies with a fair dollar amount that you can tolerate some volatility just in case it does get worse. Eventually markets do tend to recover so at least you're able to partake in that recovery.
Less is more in this market. If you could afford to buy 10 shares, maybe just buy one. Please do not overexert yourself. Don't ruin this potential dip opportunity for yourself because you got too greedy too early on and then you got shaken out because markets got worse before they got better. Be intentional. Be calculated. Make sure that the potential for profit outweighs your potential for loss and be aware of your position size. It is one of the single biggest mistakes a lot of traders are making right now. You can buy any speculative asset, but if you do it with a dollar amount that you can tolerate, there's no risk of getting shaken out. There's no risk of a margin call because you're not using leverage.
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