EB Daily Market Report - Tuesday, October 14, 2025
Executive Summary
- Futures were very weak overnight and our major indices gapped lower
- Buying resumed early, however, and relative strength in small caps (IWM, +2.02%) is quite apparent
- The 10-year treasury yield ($TNX) is down 3 basis points and threatening the 4.00% level for the first time in a month
- Money is rotating strongly into sectors that love Q4 - financials (XLF, +1.55%) and industrials (XLI, +1.54%)
- Technology (XLK, -0.46%), meanwhile, is the only sector lower today
- Semiconductors ($DJUSSC, -2.06%) are the primary contributors to the XLK weakness
- Cryptocurrencies, after a harsh weekend and subsequent recovery, are lower again today
- Commodities are mixed with gold ($GOLD, +0.80%) soaring again, while crude oil ($WTIC, -1.26%) languishes, dropping to under $59 per barrel
- Wells Fargo (WFC, +8.04%) as banks ($DJUSBK, +1.93%) mostly crushed revenue and earnings expectations to kick off earnings season
Market Outlook
Money is rotating to small caps. It's evident and here's one very quick visual, looking at the relative performance of the small cap IWM vs. the large cap SPY:
A picture is worth a thousand words. Wall Street is favoring small cap stocks, which is exactly what we've been talking about and thought would happen throughout 2025. We simply needed to Fed to finally act and restore the rate-cutting campaign of 2024. Since they've done that, the rest has been history. The IWM is now trading at an 8-month relative high vs. the benchmark S&P 500.
Sectors/Industries
Banks ($DJUSBK) had not been looking very good over the past few weeks, but that is changing big time the past two sessions. The regional bank ETF (KRE) has shot higher today and is on the verge of recapturing its 20-day EMA. I see this group breaking back out above the September high and ultimately moving to an all-time high. Here's what the 5-year weekly chart currently looks like:
Note that the longer-term uptrend remains perfectly intact, and the black arrows mark RSI 50 tests at each of the last 3 pullbacks. I expect the KRE to make its way back to the 68-71 price resistance area, eventually breaking out to a fresh high.
ChartLists and Trading Strategies
Tonight, we are having our max pain event, where we discuss potential directional moves on our major indices and a few select stocks, based upon outstanding call and put open interest. While no result or directional move can ever be guaranteed, it does help us evaluate risk. For instance, the following two stocks - OKLO and RGTI - both have soared and have a TON of net in-the-money call premium that COULD lead to short-term declines. Again, a decline cannot be guaranteed and shouldn't be viewed as imminent, but I would never buy a stock like these during monthly options expiration week, because of the significant risk of reversal. I show the max pain levels for each stock with a green horizontal line.
OKLO
RGTI
Both of the horizontal green lines are at or above current rising 20-day EMAs, so a simple 20-day EMA test would help save market makers a boatload of option premium.
If you'd like to learn more, please join us for our Max Pain event later today at 5pm ET. Room instructions were sent out separately earlier today.
Upcoming Earnings
We have begun tracking the daily Upcoming Earnings and the Weekly Upcoming Earnings Relative Strength ChartLists for Q3 earnings. They are included on our website under ChartLists.
Economic Reports
Economic reports due out based on government data continue to be delayed, because of the U.S. government shutdown.
Happy trading!
Tom