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Progress in the Middle East unraveled over the weekend, while a strong earnings report from TSMC and solid results from major banks failed to lift stocks as investors grappled with elevated expectations. The result has been a market where “good news” may already be priced in, leaving traders focused on timing and how stocks typically react around earnings.
After Iran briefly declared the Strait of Hormuz open to commercial traffic, oil fell more than 10% and expectations for a deal appeared to rise. President Donald Trump said the main points were “basically finalized.”
That optimism reversed on Saturday when Tehran changed course after Trump refused to lift the U.S. naval blockade, and the Strait “went dark again.” On Sunday, the U.S. Navy seized an Iranian cargo ship in the Gulf of Oman—the first such incident since the blockade began. Trump then threatened to destroy every power plant and bridge in Iran.
As of Monday, Iran said there is “no plan” for a second round of negotiations, even as U.S. delegate Steve Witkoff was reportedly flying to Pakistan for talks before a two-week ceasefire expires.
The Strait has been effectively closed for nearly two months, with more than 500 million barrels not reaching the market—described as the largest energy supply disruption in modern history. Brent crude was reported near $95, up 25%+ since the war started.
Stocks were lower as the article was written, but not “sinking” as much as some might expect, suggesting investors were still looking for a potential last-minute off-ramp.
In technology, Taiwan Semiconductor Manufacturing Company (TSMC) delivered what was described as a near-perfect earnings report, yet the stock fell more than 3% on the day.
The article attributes the decline to expectations that had already been built into the stock. TSMC had rallied about 20% in the two weeks leading into earnings, effectively “pricing in” a flawless quarter.
It also notes that the broader market had been strong: through Friday, the Nasdaq was on a rare multi-day winning streak, with AI infrastructure, semis, and growth names up 15% to 25% over the past couple of weeks. In that context, even strong results may lead to consolidation rather than acceleration.
Financial results from major banks were also described as strong, yet only Citigroup’s stock climbed on the day of its earnings announcement.
Veteran trader Jonathan Rose is cited for the view that the issue is not whether results are good, but whether they are surprising relative to what the market already expects. The article frames earnings season as a comparison between the “historical move” a stock tends to make and the “expected move” implied by options pricing. When those align, there is little edge; when they diverge, opportunity can emerge.
The article argues that in an environment where expectations have been pulled forward and priced into stocks, the narrative behind a move can lose its usefulness. Traders may still be correct on fundamentals and long-term outlook, but can be wrong on near-term stock behavior.
As an alternative, the piece highlights an approach developed by TradeSmith. Its CEO Keith Kaplan says the system does not rely on balance sheets, earnings reports, or news headlines. Instead, it detects “tiny anomalies” in stocks’ historical data and positions trades when similar conditions appear again, without attempting to explain why the patterns work.
In internal testing, the signals-based approach reportedly produced an average gain of 2.6% over nine trading days—described as equivalent to a 73% gain across a full year—compared with 0.4% for the S&P 500 over the same nine-day period.
The article concludes that if earnings season has felt harder to read, it may be because the market’s expectations are elevated and reactions are inconsistent. It presents signals-based, pattern-driven trading as one way to adapt to an environment where “obvious” outcomes do not always translate into stock gains.
(Disclaimer: I own TSMC)
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