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Good morning. Yesterday delivered a cooler inflation report, the biggest one-day collapse in IBM's history, and a Nasdaq that climbed back over 26,000. Today brings a heavy morning of earnings, led by ASML and Morgan Stanley.
One note: last night's edition did not go out, so the lesson it carried, on account types and Nicolas Darvas, is included below the market section.
The Market Gauge
Here is where the market finished on Tuesday:
S&P 500: 7,543.59, up 0.38%
Nasdaq: 26,107.01, up 0.90%
Dow: 52,508.27, up 0.02%
What drove it: June's inflation report came in cooler than almost anyone expected. Per Investor's Business Daily, consumer prices fell 0.4% on the month and rose 3.5% from a year earlier, both below forecasts. Core inflation, which strips out food and energy, was flat on the month and up 2.6% year over year, also cooler than expected. That eased bets on a Federal Reserve rate hike this month, Treasury yields fell, and the Nasdaq led the day, reclaiming both the 26,000 level and its 50-day moving average after slipping under them on Monday.
Beginner note: Look at the Dow. It finished up 0.02%, about 10 points, on a day when IBM crashed 25.1% for the largest one-day loss in its history. One of the Dow's 30 members had the worst session it has ever had, and the index barely moved, because the other 29 pulled the other way. That is worth remembering when a scary headline about one company arrives: an index is a team score, not a single stock.
On today's calendar
Today is about earnings rather than economic data:
ASML reports before the open: the Dutch company builds the machines that make advanced computer chips. Nearly every cutting-edge chip in the world is produced on ASML equipment, so its results and its order book get read as a forecast for the entire semiconductor industry. IBD notes the stock rose 2.9% Tuesday to 1,775.65 but ran into resistance, so a strong reaction could matter.
Morgan Stanley, Johnson & Johnson and Bank of New York Mellon also report before the open: Morgan Stanley continues the bank earnings that began Tuesday with Goldman Sachs and JPMorgan Chase, both of which beat expectations. Johnson & Johnson gives a read on healthcare, and BNY Mellon on the plumbing that holds and moves institutional money.
China's economy, reported overnight: China's economy grew 4.3% in the second quarter versus a year earlier, a touch below the 4.5% expected. June retail sales rose 1% and industrial output grew 5.3%, both better than forecast. China is a major customer for chipmakers and industrial firms, so this data can nudge those stocks before the U.S. open.
On the radar: CrowdStrike
$CRWD ( ▼ 1.88% ) sells cybersecurity software, delivered over the internet, that protects a company's laptops, servers and cloud systems from hackers. It was the strongest stock in the S&P 500 on Tuesday, closing at $210.73, a gain of 12.1%. The move followed IBM's chief executive saying that customers were distracted by fast-moving, industrywide cybersecurity concerns, which investors read as demand heading toward companies like this one.
How it has been acting: CrowdStrike's 52-week range runs from $85.68 to $210.95, and Tuesday's close landed right at the top of it, on a fresh 52-week high set that same session. The company is now worth about $215 billion. It is a component of the IBD 50, IBD's list of leading growth stocks, and IBD flagged it as flashing buy signals on Tuesday.
Why it is worth watching: Tonight's lesson covers market orders versus limit orders, and a stock like this is exactly why that choice matters. When something jumps 12% in a session, the price can move between the moment you click buy and the moment your order fills. A market order says "get me in at whatever the price is," which on a fast-moving stock can mean paying more than you planned. A limit order says "get me in, but not above this price." Watch CrowdStrike today and notice how much it travels in a single hour. That movement is the reason experienced traders are deliberate about order type.
Account types: cash vs margin vs IRA
Three account types, three different sets of rules. The choice you make at signup affects what you can trade, how you're taxed, and what happens to your money in a worst case.
When you open a brokerage account, you'll be asked to pick one. The three that matter for most BiST readers:
Taxable individual brokerage account (sometimes called a "non-retirement account" or "general investing account"). Money you deposit is post-tax (you've already paid income tax on it). Capital gains and dividends are taxable in the year they're realized. Most flexible, you can deposit, withdraw, or trade in any pattern you want. This is the default account type and the one most beginners open first.
Roth IRA. A retirement account funded with post-tax money. You deposit money you've already paid income tax on, and from that point forward, for the rest of your life, gains, dividends, and withdrawals are tax-free, as long as you wait until age 59½ to make withdrawals. Annual contribution limit ($7,000 in 2026, $8,000 if you're 50 or older). Income limits apply (the contribution limit phases out at high incomes, though there are workarounds via "backdoor" conversions).
Traditional IRA / 401(k). A retirement account funded with pre-tax money, you get a tax deduction in the year you contribute, then pay taxes when you withdraw in retirement. Contribution limits similar to Roth ($7K/year for IRAs, much higher for 401(k)s). Less flexible than Roth (you must take required minimum distributions starting in your mid-70s).
For most BiST readers under age 60, the priority order is roughly:
Roth IRA, for any long-term capital you can realistically commit until age 59½
Taxable account, for capital you might need access to before retirement, and for amounts above the Roth contribution limit
Traditional IRA / 401(k), primarily relevant if you have employer matching to capture, or if you're in a high tax bracket now and expect a lower one in retirement
The trader who maxes out their Roth IRA every year and uses it to compound their best ideas tax-free will, over a 30-year horizon, end up with substantially more money than the trader who does the same trading in a taxable account. The difference is dramatic, enough to fund a comfortable retirement on its own in many cases, and it requires no different trading skill, just different account selection.
Cash vs margin
There's a separate dimension: within any of those account types (except IRAs, where margin is restricted), you can choose cash settlement or margin.
Cash account: you trade only with money you've actually deposited. If you have $10,000 in the account, you can buy up to $10,000 of stock. When you sell a position, the proceeds settle in T+1 (the next business day), and only after settlement can you redeploy that capital.
Margin account: you can trade with borrowed money from the broker. If you have $10,000 in cash and use 2:1 margin, you can buy up to $20,000 of stock, half of your own money, half borrowed at margin interest rates. You can also short stocks (sell them without owning, hoping to buy back lower) only in a margin account.
Margin amplifies returns in both directions. A 10% gain on $20,000 of stock is $2,000, a 20% return on your $10,000 of equity. A 10% loss on the same position is $2,000, a 20% loss on your equity. The borrowed money is debt you owe regardless of how the trade goes.
For nearly every beginning BiST reader, start with a cash account. Margin introduces a second source of risk (forced liquidation if the position falls below maintenance requirements) on top of the underlying market risk. The traders who blow up their accounts most spectacularly are almost universally margin traders. We'll cover when (if ever) margin is appropriate in Month 5 (Risk Management) and Month 10 (Execution).
Trader Tuesday: Nicolas Darvas
Nicolas Darvas is the second of the foundation legends we'll feature in Month 8. We're meeting him here, ahead of that, because his story is exceptionally relevant to the question of what kind of account you actually need.
In the mid-1950s, Darvas was a touring ballroom dancer, performing in clubs across Europe, Asia, and North America. He had no Wall Street background, no professional training, no continuous access to financial markets. He was on the road 200+ days a year.
A Toronto nightclub paid him in stock once instead of cash, about $3,000 worth of an obscure mining company. The stock rose, Darvas sold, and he kept some of the proceeds. That accidental introduction to the market caught his interest. He started studying.
What Darvas had, that most professional traders of his era didn't, was extreme constraint. He couldn't watch the ticker tape. He couldn't talk to brokers continuously. He couldn't react to news in real time. His information was a daily telegram from his broker with closing prices, plus Barron's magazine when he could find it.
Out of that constraint, he developed what's now called box theory. The idea: a stock in a healthy uptrend doesn't move in straight lines, it moves in stair-stepped boxes. A box is a price range the stock holds for some weeks (a flat consolidation). When the stock breaks above the top of its current box on heavy volume, it's started forming a new, higher box. When it breaks below its current box, the trend has changed.
Darvas's rule: buy at the top of the current box, on volume confirmation. Sell when the stock breaks below the bottom of any subsequent box.
I had to learn that there is no such thing as 'can't' in stocks. The only thing is whether you have the patience to find the right ones and the discipline to hold them while they work.
Between 1957 and 1959, Darvas turned roughly $36,000 into $2,000,000, equivalent to about $22 million in today's dollars, using only this method, mostly trading from telegrams in hotel rooms. He kept meticulous trade records (which he later published in his book), and his methodology has been studied by every generation of momentum trader since.
The reason this matters for the lesson on accounts: Darvas didn't have a margin account. He didn't have advanced order types. He didn't have continuous data. He had a cash account and a disciplined methodology. The constraint forced him to be patient, to make fewer trades, to sit through volatility, to let winners run.
What I owned, I would only sell when it ceased going up. I would not sell because I was nervous, or because the news was bad, or because someone said sell. Only when the stock told me, by breaking the bottom of its box, that the trend had changed.
We'll cover Darvas's full method in Month 8 Week 1. For today, the takeaway: a cash account, used patiently, is sufficient for a methodology that produced 50x returns. Margin is not a requirement for serious trading. Often, it's an obstacle to it.
ONE FOR THE ROAD
Reply with one of these: (a) the account types you currently have open, (b) the account type you're considering opening, or (c) the question you have about the differences. We'll feature representative answers in Saturday's recap.
Educational content only. Not financial advice. Past performance does not predict future results. Read the full financial disclosure.
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