EB Daily Market Report - Wednesday, February 26, 2025

Dear Members.

As a reminder, Tom Bowley is tending to some family medical issues so some Daily Market Reports this week will be abbreviated.

Once again we're seeing 6000 is a magnet on the S&P with all of the major indexes up nicely ahead of NVDA's earnings report after the bell. It also turns out that the 50 day moving average on the S&P is currently at 6006, a level the bulls would like to clear to get back on track.

I do want to point out a few things Tom has brought to my attention.

One thing of note is that the IWM, relative to the QQQ, has printed a higher high for 2 days in a row, the first time that's happened in all of February.  It could be an early signal that the drop in the 10-year treasury yield is suggesting weaker economic conditions ahead, which would favor rate cuts in 2025.  Rate cuts are critical to the sustained relative strength in small caps.  Obviously, two days don't make a trend, but this development is worth watching.

One other thing worth mentioning about the small cap IWM.  It has intermediate-term price support in the 214-215 range and it traded as low as 213.49 yesterday, before reversing and closing above support at 215.41.  Major support is typically a great opportunity to TRADE the juiced ETF (TNA) with relatively low risk - i.e., one could simply exit on a breach of yesterday's low on the IWM at 213.49.  It's not a guarantee that we go higher from here.  Rather, it's an entry point where risk can be managed much more appropriately.

The VIX has cooled some today but it's still at a level showing some market concerns. Accordingly, it might be prudent to err on the side of caution here and to see if the selling of late leads to a near term bottom or if there's even more selling to come.

The reaction to NVDA's earnings report after the bell could gives us some indication of what's to come in the short term. Even with today's nice showing there's been technical damage on all of the major indexes. There's nothing wrong with having some cash available in case we get a deeper pullback and for those with a longer term view there's nothing we're seeing indicating an overly bearish picture.

At your service,

John Hopkins