Editor’s Note: NVIDIA just posted another blowout quarter — and the stock is still below its all-time high. If the biggest AI builder in the world can print record earnings and not move the tape, Jim’s new briefing argues the question has shifted: which companies don’t need the buildout to prove out on schedule? He names the ones already delivering — in The AI Margin Rotation briefing →

The tech sector is stuck in neutral. After hitting an all-time high in early June, the iShares U.S. Technology ETF (NYSE: IYW) has traded sideways.

The fund’s top three holdings are NVIDIA (NSDQ: NVDA), Apple (NSDQ: AAPL), and Microsoft (NSDQ: MSFT). Combined, those three tech giants account for roughly 37 percent of the fund’s total assets.

Last week, NVIDIA reported another blowout quarter. That news drove its share price up nearly 9 percent in a single day. Despite that surge, it is still below its all-time high share price achieved in May.

The story is similar for AAPL, which hit an all-time high in late July. Since then, it has fallen back to where it was in early June.

Microsoft is at its highest share price since the war began. However, it is up less than 5 percent since the start of this year and below its all-time high price achieved last year.

Window Shopping

Don’t get me wrong, I have nothing against tech stocks. In fact, I hold several in the portfolios I manage for Personal Finance.

I also manage a new trading service called Profit Windows. Last week, I issued my first two trade alerts.

Neither one of those trades involves a tech stock. In fact, one was for an airline and the other for a homebuilder.

I do not expect either company to shock Wall Street with blowout earnings that send their share prices racing up the charts. That rarely happens with airlines and homebuilders.

Instead, I believe both companies will continue to post solid quarterly reports that meet or exceed guidance. If they do, then Wall Street may soon raise the multiples it is willing to pay for those results.

Strait Partnership

Wall Street was distracted last week. NVIDIA released its latest quarterly results on Wednesday. Two days later, new Fed Chair Kevin Warsh spoke at the Jackson Hole Economic Symposium.

While that was happening, Iran and Oman announced they have agreed to terms to share revenue from the Strait of Hormuz. If that deal is approved by the United States, crude oil prices should soon be coming down.

I believe the White House will go along with this arrangement. Oman is a trusted ally, and the Trump administration would like to see lower gasoline prices heading into the midterm elections in November.

The implications of that development are potentially enormous. It is also the impetus for the two Profit Windows trades I made last week.

Higher jet fuel prices have sent airline stocks into a tailspin. That’s because jet fuel is the single largest variable expense for an airline.

Also, the inflationary pressures caused by higher gasoline prices have suppressed demand for new housing. Mortgage rates are above 6.5 percent after dipping below 6.0 percent in late February.

Jet Fuel and Mortgage Rates

Those conditions have opened a profit window that I find compelling. Airline stocks tend to move in the opposite direction of jet fuel prices, while homebuilders tend to rise when mortgage rates are dropping.

To be clear, I don’t expect jet fuel prices to drop precipitously. Nor do I think mortgage rates will make a beeline for the basement.

Neither one of those things needs to happen for my trades to pay off. Once Wall Street analysts realize that oil prices are heading down towards their pre-war levels, they will adjust their financial models accordingly.

When that happens, my two stocks should start climbing the charts. And when they do, the call options that I recommended could appreciate rapidly.

That is my approach to booking big gains in a sideways stock market. Identify undervalued stocks, wait for a triggering event, and then make my trades before Wall Street makes its adjustment.

The framework I apply to Profit Windows — find undervalued positions where the market hasn’t caught up to an underlying reality, and get in before Wall Street reprices — is the same discipline I’ve used at Personal Finance for years. My current Personal Finance briefing puts that discipline on a specific tension: the AI builders like NVIDIA can post record quarters and still sit below their all-time highs, because the market is waiting for the spending to prove out. The companies I find more interesting right now are the ones where that proof isn’t required — traditional businesses already running leaner, already widening margins from AI, before any reckoning arrives. See the AI Margin Rotation briefing →