EB Daily Market Report - Brief Update - Wednesday, September 24, 2025

We had an excellent Live Trading Room session this morning, discussing the bullish Big Picture, along with the more cautious short-term picture.  The bottom line is that the overall market environment remains very much "risk on", which suggests that the current secular bull market advance can be trusted, NOT that it will continue unabated - although it may.

The short-term issues are just that - short-term issues.  Sentiment changes often in the near-term and recently, it's certainly become more bearish given the big drop in the 5-day SMA of the equity put call ratio ($CPCE) and the emergence of the SPX/VIX positive correlation (ie, more cautious options pricing as the market moves higher).  These two developments show a change in sentiment from both a retail trader perspective and market maker perspective, respectively.  This increase in short-term bearish sentiment guarantees us nothing.  However, it does indicate that short-term market risks are increasing.

I take that increasing risk seriously, so I tend to lower my exposure during such periods, which is what I've done and what I discussed with members earlier during our Live Trading Room.  I'm currently 70-80% cash with limited exposure mostly to small caps (IWM), regional banks (KRE), and homebuilders (XHB).  From a longer-term perspective, I'm a proponent of remaining fully invested as I believe U.S. stocks will move higher into year end.  I do think it's very important to remind everyone, however, that neither I nor EarningsBeats.com are Registered Investment Advisors (RIAs).  Each member must make his or her own decision as to risk and how much and where he/she invests.  We simply provide education.

One area that will hold the key near-term for both the S&P 500 and NASDAQ is the semiconductor group ($DJUSSC).  This group is heavily weighted in these two major indices.  When the DJUSSC began selling off earlier today (1.5% selloff in roughly 40-45 minutes), the major indices followed suit.  When they recovered most of those earlier losses, the major indices once again did the same.  How do we finish out the day in semiconductors?  A strong finish would obviously bode well for the S&P 500 and NASDAQ, while selling into the close could set up both indices with upcoming 20-day EMA tests.

I'm honestly just sitting back with a mostly neutral short-term stance and watching the action.

Happy trading!

Tom