EB Daily Market Report - Tuesday, September 16, 2025
Executive Summary
- Futures were mixed overnight and they stayed that way right until the market opened
- All of our major indices are lower as of the midpoint of today's action, though weakness is a bit more concentrated in small and mid caps
- Energy (XLE, +1.57%) is the primary gainer today, but consumer stocks are strong as well with discretionary (XLY, +0.45%) outpacing staples (XLP, +0.26%)
- 7 sectors are lower, led by utilities (XLU, -0.97%) and real estate (-0.73%), two defensive groups
- Steel ($DJUSST, +2.05%) is a leading industry group today and is worth watching; the DJUSST is in a bullish ascending triangle pattern with key resistance at 610
- Many commodities are higher, including crude oil prices ($WTIC, +1.94%), which is responsible for the gains in energy
- One day ahead of an FOMC policy statement and decision, the 10-year treasury yield has barely budged, remaining flat near 4.03%
- August retail sales jumped 0.6%, twice as much as expected, but it's doubtful that changes the likelihood of a fed funds rate cut tomorrow afternoon at 2:00pm ET
Market Outlook
One of the most important developments, in my opinion, is the recent breakout of the XLY:XLP ratio to a multi-year high. This is firm evidence that market participants are in risk-on mode and that is what drives secular bull market advances. It also typically provides us the confidence that any pullback will be just that - a pullback, not the start of a more damaging correction, or especially cyclical bear market. Check out this
XLY:XLP chart:
The relative strength of consumer discretionary over the past 3-4 weeks has been exceptional. We know that there's a very strong positive correlation between the direction of this XLY:XLP ratio and the direction of our benchmark S&P 500 index. Personally, it's my favorite sustainability ratio and I place a lot of emphasis on it when I make market calls.
Based on the current look of this chart, I absolutely believe that we're going to hit 7000 on the S&P 500 before year end, even though a period of selling/consolidation soon should also be expected.
Sectors/Industries
While the XLY:XLP relative ratio has broken out to a multi-month high, the absolute chart of the XLY shows that this ETF has moved to an all-time high:
Note that the XLY:$SPX still resides at key 2025 relative resistance and has much further to go to reach its all-time relative high, set in Q4 2021 near the 0.044 level. Renewed strength in Tesla (TSLA) and Amazon.com (AMZN), the two most heavily-represented stocks in the XLY, is the primary reason for the latest XLY and XLY:XLP surges.
ChartLists and Trading Strategies
Among discretionary stocks, here are two that look very interesting as potential trades currently:
ZUMZ
WWW
Both are either testing a key moving average like the 20-day EMA or testing the top of gap support from earnings.
Upcoming Earnings
Earnings have slowed down, so we're no longer tracking the daily Upcoming Earnings and the Weekly Upcoming Earnings Relative Strength ChartLists. We will resume those ChartLists when Q3 earnings kick off in mid-October.
Economic Reports
August retail sales: +0.6% (actual) vs. +0.3% (estimate)
August retail sales less autos: +0.7% (actual) vs. +0.4% (estimate)
August industrial production: +0.1% (actual) vs. +0.0% (estimate)
August capacity utilization: 77.4% (actual) vs. 77.4% (estimate)
July business inventories: +0.2% (actual) vs. +0.2% (estimate)
September housing market index: 32 (actual) vs. 33 (estimate)
Happy trading!
Tom