To The Moon

As we head into a pivotal earnings week, the market is presenting fascinating opportunities across multiple sectors. With 70% of the TMT (Technology, Media, and Telecommunications) sector reporting earnings over the next two weeks, and options pricing implying the lowest volatility in two decades, this could be the perfect storm for savvy traders. Let's dive into what's moving and where the smart money is positioning.

The Dollar's Hidden Impact on Q2 Earnings

While everyone seems bearish on the dollar short-term (which could actually lead to a counter-trend rally), the real story is what the dollar's weakness throughout 2025 means for Q2 earnings. The dollar has been weakening since January, and Goldman Sachs is projecting a further 4% decline in the trade-weighted USD. This creates a significant tailwind for companies with international exposure that many investors are overlooking:

• Tech leads the charge: Technology is the only S&P sector with over 50% of revenues from outside the US

• The Magnificent 7 are major beneficiaries: Meta derives 64% of revenue internationally, while Microsoft and others also see substantial overseas earnings

• Surprising winners: Las Vegas Sands (100% non-US revenue) and Booking.com (90% non-US) could see outsized benefits

Why a Weak Dollar Boosts International Revenue

Think of it like this: When the dollar is weak, it's like everything priced in foreign currencies gets a "discount" when converted back to dollars.

Example: Let's say Apple sells an iPhone in Europe for €1,000:

• When the dollar is strong (€1 = $1.00): That €1,000 sale = $1,000 in revenue

• When the dollar is weak (€1 = $1.10): That same €1,000 sale = $1,100 in revenue

Apple didn't raise prices or sell more phones - they just got an extra $100 simply because of currency exchange rates. Now multiply this effect across millions of products sold internationally, and you can see why a weak dollar creates such a powerful tailwind for earnings.

This is why companies with high international exposure can see significant earnings boosts during periods of dollar weakness, even if their actual business performance remains flat.Goldman's macro model suggests a 10% decline in the dollar would give us a 2-3% boost in earnings, all things being equal. With the dollar already weak throughout Q2, international sales converted back to USD will provide this additional earnings boost for internationally exposed companies. This is particularly relevant as we approach major earnings from Tesla ( $Tesla Motors(TSLA)$ ) and Google ( $Alphabet(GOOGL)$ ) this Wednesday, both of which have significant international operations. Even if the dollar strengthens going forward, the Q2 impact is already baked in.

Sector Rotation: Where Money is Flowing

The market is clearly rotating, and understanding these flows is crucial:

Hot Sectors Breaking Out:

1. Utility/Electric Power - Breaking to all-time highs

2. Alternative Energy - Uranium names like SMR and OKLO leading

3. Telecom Infrastructure - UI setting up for a major breakout

4. Investment Banks & Brokers - Schwab (SCHW), Coinbase (COIN), and Interactive

Brokers (IBKR) showing particular strength

Uranium: The Unstoppable Force

The uranium trade continues to show incredible strength:

• CCJ - Up from $21 to $25+ in two weeks

• SMR - Breaking out of downtrend with huge volume

• NE, OKLO, and others - All showing similar patterns

The key here is to wait for pullbacks rather than chasing the current moves.

The Options Opportunity

With implied volatility at 20-year lows heading into earnings season, this presents a rare

opportunity for options traders. The market is pricing in the smallest expected moves in two

decades, which means:

• Options are historically cheap

• Even modest earnings beats/misses could lead to outsized moves

• Consider buying options 5 days out rather than waiting until earnings day

This is particularly interesting for the big tech names reporting this week. If there was ever a time to play earnings with options, this might be it.

Trading Strategy for the Week

Given the setup, here's the optimal approach:

1. Be Tactical, Not Strategic - This is an earnings-driven week

2. Consider Options - With implied volatility at 20-year lows, buying options for earnings plays has rarely been cheaper

3. Focus on International Exposure - Companies with high non-US revenue could surprise to the upside due to Q2's weak dollar

4. Watch Sector Flows - Money is rotating into specific sectors (energy, uranium, financials) with clear momentum

The Bottom Line

This week presents a unique opportunity with historically low options pricing meeting a major earnings catalyst. The weak dollar throughout the first half of 2025 provides an additional tailwind for Q2 earnings that many aren't factoring in - and if Goldman Sachs is right about another 4% decline, this trend could continue. By focusing on sectors showing strength (energy, uranium, brokers) and following the money flows, you're setting yourself up for success.

Remember: In a market that wants to go higher, your job is to identify the strongest sectors and wait for the pullbacks. Don't chase – let the trades come to you.