EB Daily Market Report - Wednesday, June 4, 2025

Tom Bowley - June 04, 2025

Executive Summary

Futures were mixed overnight, but there was a slight bullish bias at the opening bell
After a quick early-morning pop, U.S. stocks pulled back during much of the first half of the day, before rallying a bit in the afternoon
NASDAQ 100 shares have been outperforming on the session
The ADP employment report was released this morning and it came up well short of the jobs estimate
The 10-year treasury yield ($TNX) reacted as we might expect, tumbling 10 basis points to 4.36%
That report will likely ratchet up pressure on the Federal Reserve to cut the fed funds rate, although we have a more important nonfarm payrolls report due out on Friday morning
Communication services (XLC, +0.65%) leads all sectors, though sector performance is split; 6 sectors are higher and 5 are lower
Energy (XLE, -1.79%) is the laggard as crude oil prices ($WTIC, -0.88%) fall back after Tuesday's rally
The Volatility Index ($VIX, -1.02%) is down once again as fear further subsides
ON Semiconductor (ON, +5.95%) is rallying hard for a 2nd day in a row and is the top-performing stock on the S&P 500

Market Outlook

I always like to keep one eye on banks ($DJUSBK). While it's certainly not imperative that they lead stock market action, I do like for the group to participate in rallies. That's what the banks have been doing - participating. Check out their current chart:

I love the bank's AD line, which is extremely bullish, like so many other areas of the market. Its bottom panel remains solid, though mostly sideways. This is what tells me that banks are participating in this rally. Finally, I see a bull flag in terms of price action on the DJUSBK - a beautiful rally off the April 7th low, followed by forming a base (flag) above the 20-day EMA over the past few weeks. I see a group poised to break out again.

Sectors/Industries

Last week, I highlighted two industry groups that were showing marked improvement - defense ($DJUSDN) and industrial machinery ($DJUSFE). Both continue to show bullish technical conditions and 6 of the 7 of the stocks that I provided within those two groups moved higher (CW moved fractionally lower). Check out the 7 stocks that I provided first, and then look at the one week performance of all 7, along with the performance of their industry groups:

CW 96.9 (RG)
AXON 94.9
KTOS 94.0
DRS 90.9
VSEC 82.7 (RG)
WWD 91.7
ROK 86.3 (RG)

Here is the one-week performance:

Finding leading stocks in leading sectors and industry groups is a first step in improving trading results.

ChartLists and Trading Strategies

In today's Live Trading Room, a member asked me about Tesla (TSLA) and I liked the chart so much that I bought it - with a tight stop, of course:

TSLA

Are we on the verge of a reverse head & shoulders bottom? If so, a breakout above 368 would confirm the pattern and would likely lead to a much larger rally.

If keeping a tight stop is of utmost importance to you right now, then bail on TSLA if it fails to hold onto its rising 20-day EMA. That could happen today, though it was still hanging above that moving average with just a few minutes left in today's trading. A second possibility would be to keep an intraday stop below today's low, assuming that it marked a short-term bottom and was the reverse right shoulder. To the upside, a return to its recent high near 368 is what I'd look for.

Upcoming Earnings

We now have our Upcoming Earnings ChartLists on our website, so be sure to check those out.

Economic Reports

May ADP employment report: 37,000 (actual) vs. 110,000 (estimate)

May PMI composite: 53.0 (actual) vs. 52.1 (estimate)

May ISM services: 49.9 (actual) vs. 52.0 (estimate)

Beige book released at 2:00pm ET

Happy trading!

Tom