EB Daily Market Report - Thursday, May 8, 2025
Executive Summary
- Futures were higher overnight and our major indices have built on those early gains
- The U.S. and U.K. have struck a trade deal, with the U.S. Dollar (UUP, +0.90%) surging
- Cryptocurrencies, a proxy for risk-on investments, are climbing with etherium ($ETHUSD, +15.79%) and solana ($SOLUSD, +8.56%) among the leaders
- The rising dollar and falling Volatility Index ($VIX, -4.71%) are definite headwinds for commodities, especially gold ($GOLD, -2.62%); crude oil ($WTIC, +3.27%), however, is rallying
- The 10-year treasury yield ($TNX) has jumped 10 basis points today to 4.38%
- Energy (XLE, +1.86%) is the best-performing sector, given the strength in crude oil
- Defensive sectors are lagging badly as health care (XLV, -0.64%) and utilities (XLU, -0.56%) are weak
- Earnings remain in focus with Axon Enterprise (AXON, +14.32%), a defense ($DJUSDN, +2.72%) stock, surging to the top of the S&P 500 after blowing out quarterly estimates
Market Outlook
Here's a quick look at the S&P 500 and a few key relative ratios. I wanted to see how these ratios are performing since the Fed announcement on Wednesday:
I LOVE the action here. A move up in the S&P 500, while money was rotating defensively would have been a serious question mark. But we're seeing great support in terms of "below the surface" signals, which, in my opinion, further supports the notion that we're heading back to all-time highs.
Sectors/Industries
I like to review our key sectors after big events in the stock market and Fed meetings qualify as big events, in my view. I took a look at key ratios in the chart above, so now let's see how money was moving among our 5 aggressive sectors - XLK, XLY, XLC, XLI, XLF - since the Fed announcement:
Again, I LOVE that the XLK and XLY have performed VERY well on a relative basis. It's very difficult for all 5 of these areas to outperform the S&P 500 at once. In fact, when the XLK, which is roughly 30% of the S&P 500, outperforms, it makes it difficult for ANY other sector to outperform simultaneously. Though not pictured above, all four defensive sectors - XLV, XLP, XLRE, XLU - have underperformed significantly over the past 24 hours.
This action since yesterday at 2pm ET is undoubtedly bullish.
ChartLists and Trading Strategies
I can understand trepidation in placing any long (or short) trades right now. We're now overbought with a huge selloff in our recent memory. The key, I believe, is to just make sure that stops can be kept tight. If we're wrong, we don't want to be wrong for long.
Here are two interesting trades at the moment:
REGN
This one is more of a value trade as it potentially prints a double bottom with a reversing doji candlestick:
Let me be clear. REGN is a poor relative performer in a bad industry group. This is NOT my kind of trade. However, money can be made lots of ways, so I just wanted to point out this potential double bottom just below 550. A weak finish and close near the low would negate this potential bottoming pattern.
ARM
This is a current portfolio stock that just reported its latest quarterly results yesterday after the close. ARM beat both revenue and EPS consensus estimates, yet pulled back to test its now-rising 20-day EMA:
ARM's relative strength remains problematic, but semis ($DJUSSC) are just starting to turn back higher on a relative basis and ARM shows an excellent AD line and a bullish PPO centerline crossover. There are positives here and a MAJOR positive would occur on a close above 125-126.
Upcoming Earnings
We now have our Upcoming Earnings ChartLists on our website, so be sure to check those out.
Economic Reports
Initial jobless claims: 228,000 (actual) vs. 232,000 (estimate)
Q1 productivity: -0.8% (actual) vs. -0.5% (estimate)
Q1 unit labor costs - annual rate: 5.7% (actual) vs. 5.2% (estimate)
March wholesale inventories: +0.4% (actual) vs. +0.5% (estimate)
Happy trading!
Tom