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☕️ The single biggest risk this earnings season

Jul 08, 2026

Howdy! 👋

I hope you’re off to a great start wherever today’s “5” finds you.

I am following a superb early morning workout in the high desert. Usually, it’s the coyotes and me who are out and about, but today a big owl paced me for quite some time.

What a treat! 😀🌄

Anyhoooooo…

I’m looking at headlines this morning and see plenty of the usual nonsense:

The truce in Iran is over, strikes have resumed & oil’s on the run (Read)

US 10YR yields have spiked so traders are dumping stocks (Read)

Fed minutes show the financial version of a dinner table disagreement (Read)

Apple’s chipmaking push continues with Broadcom (Read)

GM underwhelms but JPM sees a comeback (Read)

China’s warning about AI risk with Anthropic’s Claude Code but Trump’s putting the brakes on OpenAI’s newest model 🤔 (Read)

Allbirds shoes are pivoting to AI infrastructure and is now calling itself SmartBird… ummmm, yeah but I digress 🤦‍♂️ (Read)
Crypto companies get ready for quantum threat (Read)

All of which we’ve talked about before, so I thought we’d switch gears this morning.

Let's talk for a moment about the single biggest risk this earnings season

Something not 1 in 1,000 investors sees coming… getting knocked outta specific stocks you’d like to own or keep because you're holding on too tight.

Let me explain.

Millions of investors are shifting their focus to smaller and smaller time frames because they think that's the right thing to do.

Look at the math and the pattern jumps out.

The average NYSE holding period ran close to eight years back in the 1960s. Today it's under a year, and by some measures under six months. Social media is now pushing that to days or less.

Over that same stretch, margin debt has climbed to record levels and options volume has grown into the billions of contracts traded concurrently with the rise of computerization.

Investors are holding less, borrowing more, and layering on more leverage to do it — all on faster and faster time frames most are ill-prepared to deal with. Exactly the setup the big money is built to exploit.

The problem is one that most investors can't see coming.

They think they’re doing the right thing but what they don’t realize is that their actions make 'em bait for big, well-capitalized, highly quantitative traders – aka "the big money."

Individual investors are thinking about individual stocks, but they fail to grasp that the big money is thinking about probabilities.

Bluntly, big money doesn't care about your stocks, so stop thinking that it does. It cares about the odds across tens of thousands of accounts just like yours.

When millions of investors compress their time frame, they start behaving the same way at the same moments — tightening stops to the same levels, chasing the same breakouts, panicking at the same red candles, headlines and so on.

That's herd behavior, plain and simple.

And herds are predictable.

This is a mind-blower for most people but the big money couldn’t care less where Nvidia goes next week, next year or even the next 10 minutes.

What they're thinking about is where the stops cluster, where the open interest sits, where the resting orders pile up once enough retail accounts start thinking in days instead of years. Then they trade the cluster, not the company.

That's the swap that happens when you shorten your time frame without realizing it. It turns you from an investor into a data point — a predictable node in somebody else's probability model.

“Zoom out” and you disappear because there's no cluster to trade against, if you're not standing where the crowd is standing.

Ask yourself how many times you've seen great stocks get blasted on great earnings or terrible stocks run sharply higher?

If you're like me, lots.

How you play the game matters… a lot.

Quite a few big-name companies are probably going to report scorching hot numbers this earnings season including Nvidia, Palantir, Tesla, and JPMorgan Chase, just to name a few at random. I was just talking about that on Monday, in fact, when I told the super savvy David Asman that I expect earnings to be 20-25%, perhaps higher. (Watch)

The big money knows that those names will be talked about incessantly ahead of time. That’s why they'll do everything they can to create FOMO – fear of missing out – and drive prices up.

Then, when earnings come out, they’ll take those who can least afford to screw up for a ride in the afterhours or perhaps even for a day or two afterwards by dropping prices faster than an e-ticket ride.

The big money uses options and gamma risk to manipulate prices, usually to where the computers have determined there is a ton of open interest, trailing stops and resting orders.

When they’ve had enough fun, they'll run prices higher again to trigger all the resting momentum orders and burn any shorts who have piled on using volume and indicators like the RSI to suggest a short-term low.

And finally, they'll setup a last major, gut wrenching drop to wring any last weak hands outta the game AND then… only then… will they set the stage for an actual run higher.

Psychology matters a lot.

The big money knows that most individuals are "holding on too tight" so their playbook is specifically oriented to exploit that weakness by manufacturing volatility that forces smaller hands to sell at precisely the wrong time.

You can beat ‘em at their own game, but you’ve gotta start thinking like a shark, not a minnow.

Here are four ways to do that.

First, stick to quality companies.

The big money knows they want to own 'em and, in fact, can't afford not to over time. So there's plenty of liquidity at moments in time.

Second, zoom out.

The big money knows that volatility scares most investors so they foment that and exploit the opening as surely as the sun comes up tomorrow. Zooming out – meaning adopting a longer term perspective – negates this advantage while also allowing you to clearly see through the noise.

Third, use tactics that take away their advantage.

Wall Street's quants have spent billions programming every conceivable technical indicator you can think of and combining that with some of the most sophisticated order processing you can think of running on the planet's most powerful computers.

Shifting to some variation of DCA/VCA can negate that advantage by stopping the fight before it even starts. Becoming an options seller instead of an options buyer is another simple yet devastatingly effective move to consider.

And finally, keep your emotions out of the equation.

Most aspiring investors worry about being right when the most successful investors (and traders) focus on being profitable even when they're wrong.

Think about that for a moment.

Making you lose money isn’t personal – it’s their job. And the better they are at it, the worse you will feel.

At the end of the day, investing comes down to the agreement you have between yourself and the person looking back at you in the mirror which is why the sooner you can get him or her under control, the sooner your portfolio can thank you.