EB Daily Market Report - Brief Update - Wednesday, August 20, 2025

Sorry for the late message today, but I literally wanted to see the action right up to the close before commenting today.

During today's Live Trading Room, I looked at the intraday action on consumer discretionary (XLY) and consumer staples (XLP) and didn't like what I was seeing.  I was looking to see if the XLY tumbled into the close, with the XLP rising as that is exactly what happened during the first 30 minutes of trading.  Massive rotation from the XLY to the XLP on an intraday basis can spell BIG trouble for U.S. stocks.  Fortunately, that massive rotation never materialized this afternoon, which was comforting.

The FOMC minutes were released today at 2pm ET and they weren't really much of a surprise.  They indicated the mixed feelings among Fed officials as to whether inflation or the economy was the biggest threat.  And those minutes came two days before the jobs report, where both May and June nonfarm payrolls were revised substantially lower, in addition to a weak July number.  That is likely to spark more debate about the slowing economy and the need for immediate rate cuts.  However, Fed Chief Powell has also seen a HUGE spike in producer prices for July in that most recent report - all as he gets set to deliver his keynote address Friday morning during the central bank's annual symposium in Jackson Hole, Wyoming.  Market participants will be watching his every word on Friday.

The good news today, though, was that we saw strength in the afternoon, which is much better than the alternative of further distribution.  I still believe the biggest support level to watch across our major indices is the S&P 500 and its key support level at 6144.  That XLY:XLP ratio, which took a significant hit this morning, stabilized and strengthened throughout the balance of the day, avoiding being lumped in with some of the worst rotational days that usually spell stock market trouble ahead.

I believe that, while short-term selling and consolidation may be problematic, the longer-term into year end remains quite bright with more all-time highs likely in Q4, if not before.

Now let's sit back and wait for Fed Chief Powell's speech on Friday.

Also, as a reminder, our Portfolios began a new 3-month journey today as we entered all of the stocks discussed at last night's "Draft" at today's opening prices.

Happy trading!

Tom