EB Daily Market Report - Wednesday, March 19, 2025
Executive Summary
- Futures were slightly higher overnight and we saw a small gap higher at the opening bell
- Bulls were buying early as our major indices showed mostly strength this morning; we've seen a bit more trepidation as the Fed announcement at 2pm ET grows near
- Early strength was apparent in our aggressive sectors as the discretionary (XLY, +0.91%) and technology (XLK, +0.86%) are high up on the sector leaderboard
- Energy (XLE, +1.38%) has overtaken those two, however, as crude oil prices have moved just above $67 per barrel
- Copper ($COPPER, +1.65%) continues its ascent as ECB rate cuts look to spark economic improvement in Europe
- Cryptocurrencies are enjoying one of their best days in awhile, especially $USDXRP and $USDETH, which are up 10.36% and 7.09%, respectively; this is a "risk on" signal, so let's see if it continues after 2pm ET
- The 10-year treasury yield ($TNX) is up 3 basis points today and is also awaiting word from the Fed
- Boeing Co. (BA, +5.21%) is enjoying a solid day as the leader in both the Dow Jones and S&P 500
Market Outlook
As we approach a big Fed day, the S&P 500 key resistance still resides between 5680 and 5780, as I pointed out yesterday:
Thus far, we've only been able to touch the bottom of this resistance zone. If the S&P 500 turns bullish after today's FOMC announcement, watch this range for short-term market clues. A break above this red-shaded area on a closing basis would at least be short-term bullish. Bullish price action is great, but we also need to see bullish rotation.
Sectors/Industries
One Big Picture development that I'm watching, and I discussed this in today's Live Trading Room, is the long-term direction of the U.S. Dollar ($USD), because it could either confirm the 10-15 year relative downtrend in energy (XLE) and materials (XLB), or it could signal a major change in these two sectors. Check out the $USD chart below and how its direction impacts the relative strength in the XLE and XLB vs. the benchmark S&P 500:
The USD remains comfortably in its up channel, but the longer the Fed pauses its rate-cutting campaign, the more likely it is that we'll see further deterioration in the USD. Eventually, it could become long-term problematic for growth stocks with significant rotation into the XLE and XLB. It's too early to make that call, but it's definitely a long-term possibility that we need to continue to monitor.
ChartLists and Trading Strategies
I'm in cash as I await the Fed decision. If Fed Chief Powell adamantly remains in pause mode, saying "we have loads of time to watch things", my GUESS is that the stock market would react quite negatively to that and we'll see lower lows ahead. If the Fed flip flops again and talks more about rate cuts coming, then watch for growth stocks to take the lead and a more significant rally ahead, POTENTIALLY leaving the recent low as THE low for 2025. Right now, I'm just watching the action and drama unfold.
Upcoming Earnings
There are few companies reporting quarterly earnings until the banks kick off the next earnings season in mid April. Therefore, we will not be posting the list of daily earnings reports in a ChartList on our website for the next few weeks.
Economic Reports
FOMC announcement at 2:00pm ET (no change in fed funds rate expected)
Happy trading!
Tom