My Best Trading Advice as We Enter the Heart of Earnings Season

The market celebrated the start of the Trump administration with significant gains. Most notably, it was very broad action, with the Russell 2000 IWM and the equal-weight S&P 500 enjoying some of the best two weeks of trading since 2022.

The announcement of the $500 billion Stargate project for the development of AI boosted the Magnificent Seven names MAGS, but concerns about a Chinese open-source AI program called DeepSeek-R1, which was developed at a fraction of the cost of other AI models, weighed on the sector and Nvidia NVDA in particular. Apparently, the DeepSeek LLM was trained at a cost of just $6 million, which calls into question the billions that are being invested by the likes of Meta META and Microsoft MSFT in developing their AI programs.

Ironically, Meta hit new all-time highs on Friday after indicating that it was substantially increasing its spending on AI. Last quarter, a number of the Mag 7 names sold off when they announced that they needed to spend more money on AI investment, but that wasn’t the case for Meta Friday.

There was some mild profit-taking late on Friday, but with many names becoming overbought, it wasn’t surprising or particularly negative. There are still hundreds of smaller stocks that have good technical patterns.

Next week, we enter the meat of earnings season, which will make individual stock selection more important. We will also have much more coming from the Trump administration. There were lots of concerns about how tariffs would impact the market, but that has been a non-event so far.

My best advice right now is to not worry too much about the indexes. There is a lot of rotational action taking place, and there will be more focus on individual stocks during earnings season. The bears are focused primarily on the extended indexes, but that has little to do with the average stock.

Have a great weekend. I’ll see you on Monday.

At the time of publication, Rev Shark was long NVDA.