Hey trader,
My wife has an Ulta account. My daughter has one too.
I drop them off once a week and sit in the parking lot while they spend an hour in there.
I love Ulta. It is a fantastic business.
Last week, the company reported eight dollars per share in earnings. That is the highest number I have ever seen from any retailer.
Costco and Walmart will never touch that number. The stock got destroyed anyway.
This is the lesson I need every one of you to carry into next week. Not just the Ulta lesson. Three companies proved the exact same thing in the span of 48 hours.
Understanding what those signals mean is the difference between surviving this market and becoming a casualty.
This weekend, I want to show you how to read the character of a market.
Not So Content
Adobe crushed its earnings estimate on Thursday.
The stock jumped five dollars in after-hours trading. The celebration lasted about ten minutes.
Then one C-suite executive mentioned that the company had not fully figured out where AI fits into its business model. The stock imploded sixteen dollars.
Adobe is not going bankrupt. It is a digital publishing powerhouse that will exist for decades.
One sentence from a single executive erased billions in market cap overnight. The fundamentals were irrelevant. The narrative drove the price.
Beauty and the Beast
Now look at Ulta.
The sequential earnings growth went from $5.14 to $8.00. The company trades at roughly twenty times earnings. That is half the multiple of Walmart with twice the growth rate.
They took it out and shot it.
Then Meta dropped another bomb. Their AI program, called Avocado, hit delays. Zuckerberg delivered the news himself. The stock got sold immediately.
Here is the pattern every position trader should internalize right now:
- Adobe beat earnings and got sold because of one AI comment. No balance sheet analysis. No valuation work. Pure narrative panic.
- Ulta posted historic earnings and got sold because money managers are liquidating everything that moves. The chart drove the decision.
- Meta announced an AI delay and got sold because certainty disappeared in one sentence. There was no fundamental deterioration.
Three different companies. Three stellar businesses. All punished.
The Wall They Won't Tell You About
Wall Street has a famous expression. Markets climb a wall of worry. I told members on Friday that this is one of the biggest lies perpetrated in the business.
Markets climb a wall of certainty. A wall of confidence.
When clarity disappears, they sell. Adobe had no AI clarity. Meta had no AI clarity. Ulta had perfect clarity and it still did not matter because the broader market had none.
That is the character of a correction. Good news gets sold. Earnings do not protect you. Only cash and discipline protect you.
I was up three hundred dollars Friday morning. The market rolled over and I lost everything in three minutes. Flat for the day.
It did not bother me. I am sitting on 55% cash. Two of my four accounts were completely flat on Thursday when the S&P dropped 100 points. That is what hedging and position sizing look like in practice.
The Genesis COG System tracks exactly when this market character shifts. It identifies the point where high velocity selling exhausts itself and real institutional buying returns.
We are not there yet. But when that signal fires, I will be ready.
Until then, the piano player is sitting in a cell with everybody else.
Have a good weekend. Monday comes fast. Be ready.
Professor Jeffrey Bierman
Creator of the Genesis COG System