EB Daily Market Report - Quick Update - Tuesday, March 18, 2025

It's Fed week and it's options expiration week, so be sure to put on your hard hat. We could see a lot of volatility this week.

It makes sense to me that the most likely direction for the stock market, at least near-term, is higher. The Fed could shift again and talk about a worsening economy that should keep demand (and inflation) in check. That would provide them the opportunity to talk about cutting the fed funds rate. The intraday relative strength in small caps (IWM) is kinda telling that story. Even if the Fed doesn't change course, we could see a relief rally with another Fed meeting in our rear view mirror.

Perhaps most important, however, is that it's March monthly options expiration week. Currently, max pain points to a directional move to the upside. It's certainly no guarantee, but max pain resides 3.4% higher on the SPY, 4.2% higher on the QQQ, and 7.2% higher on the IWM.

Here's the S&P 500 chart and where I'd look for price resistance to hold back prices:

It would seem to me that key price resistance resides in the 5680-5780 zone, while the declining 20-day EMA generally represents difficult resistance during a correction and/or bear market. Currently, that 20-day EMA is sitting at 5767. So, if we see a post-Fed rally or an options-expiration-related rally, the 20-day EMA up to 5780 is going to be a big challenge for the bulls - on a closing basis.

I also still find it disappointing that our aggressive sectors struggle on both up and down days. Yesterday, the XLK, XLC, and XLY were among the weakest sectors as a nice rally unfolded. Today, we moved lower and the same 3 sectors are struggling again:

Let's see what the Fed has in store for all of us at 2:00pm ET tomorrow afternoon and whether our "under the surface" signals turn more bullish. I'm not holding my breath, but there's always a chance.

Happy trading!

Tom