EB Daily Market Report - Wednesday, May 14, 2025
Executive Summary
- Futures were mixed overnight, but leadership has mostly been contained in the aggressive sectors
- Technology (XLK, +0.61%) is today's leading sector, while health care (XLV, -2.10%) takes another big hit
- The 10-year treasury yield ($TNX) is up 4 basis points to 4.54%, ahead of tomorrow's April PPI report
- Cryptocurrencies, considered a "risk on" asset, are seeing some profit taking was etherium ($ETHUSD) drops 3.4%
- Commodities are mostly lower as crude oil ($WTIC) sinks about 1.25% after its recent 10% rebound
- NVIDIA Corp (NVDA, +3.89%) is leading a suddenly red-hot semiconductor group ($DJUSSC, +2.14%)
- Super Micro Computer (SMCI, +16.00%) is leading the S&P 500 to the upside
Market Outlook
We had our May Max Pain event yesterday after the market close and I pointed out to everyone that there are significant risks to the market turning lower here. Please note that I'm not calling for any sort of major top. But any time it behooves market makers to take prices lower, I take note. The max pain, which is the price point where market makers will pay out the LEAST amount of call and put premium, is roughly 5.5% lower on the S&P 500 and over 9% lower on the NASDAQ 100. Please do not misinterpret what I'm saying here. I am NOT guaranteeing a big drop and it's important to know that market makers will not lose money if the current rally continues. HOWEVER, market makers stand to make a LOT more money if prices fall over the next 2-4 trading days.
That keeps me on edge and I personally decided to move out of my individual stock trades in order to eliminate this short-term risk. I am still fully committed to my call that we're heading back to all-time highs. I just wouldn't be shocked to see a bit of short-term weakness to lessen the amount of option premium owed.
Sectors/Industries
I like to keep tabs on growth vs. value, so here's a chart of the S&P 500 since the recent April 7th bottom. You can see from the intermarket relationship charts in lower panels that growth has clearly led this rally. That's EXACTLY what we wanted to see on the subsequent secular bull market rally.
I've included a couple of key gap support levels to watch on any short-term pullbacks. Also, the rising 20-day EMA should be viewed as solid support as well. Since the April 7th low, it's rather clear to me that growth has led us back from the abyss. Had these growth vs. value ratios been weaker during the rebound, I would not be nearly as bullish as I am. But Wall Street has poured back into stocks that will perform well in a strong or strengthening economy. That's bullish.
ChartLists and Trading Strategies
Let's revisit two trades that I discussed maybe a week or so ago.
REGN
This one was more of a value trade as it potentially printed a double bottom with a reversing doji candlestick:
I mentioned that REGN was a poor relative performer in a bad industry group and that it was NOT my kind of trade. However, we did hold the low on that doji candlestick and REGN was able to bounce a little, though it's still far from hitting its target above 610. Given the continuing weakness in biotech, I'd likely take the money and RUN!
(Disclosure: I didn't make this trade)
ARM
This was a current portfolio stock (many of my individual stock trades involve portfolio stocks) that had just reported its latest quarterly results. ARM beat both revenue and EPS consensus estimates, yet pulled back to test its rising 20-day EMA:
I had mentioned that semis ($DJUSSC) were just starting to turn back higher on a relative basis and ARM showed an excellent AD line and a bullish PPO centerline crossover. I also mentioned that there were positives on the chart and that a MAJOR positive would occur on a close above 125-126. We got that and ARM is now benefiting from a surging semiconductor group. I did not trade this one either, but if I owned it, I'd consider raising the stop every day just below the prior day's low. Therefore, I'd keep riding it higher until it shows the first sign of a reversal.
Upcoming Earnings
We now have our Upcoming Earnings ChartLists on our website, so be sure to check those out.
Economic Reports
None
Happy trading!
Tom