EB Special Report - Friday, November 14, 2025

Good morning!

I just wanted to give you a few of my thoughts after what I thought was a very damaging day yesterday - in the short-term.  First, the small cap IWM broke below key short-term price support just below 238, which is definitely a short-term bearish development and ended any thoughts of holding the leveraged TNA (ETF that tracks the IWM at a 3x rate).  We still have an upcoming 20-week EMA test closer to 235, but that looks like it'll be cleared to the downside at the opening bell. 

The story being told right now, in my opinion, is that Wall Street is growing much more concerned about the Fed and is now beginning to feel as though we will NOT see another rate cut in December.  Of course, there's no guarantee of that, but the relative weakness is small caps seems eerily similar to its relative performance in late 2024 as the string of rate cuts ended.

Wall Street HATES uncertainty and this back and forth, "let's cut rates, no let's hold them steady" is the poster child of Fed uncertainty.  Remember, two things drive equity valuations - earnings and interest rates.  The stock market was pricing in 2 rate cuts this year and the likelihood of more next year.  If you rally, pricing in those rate cuts, then you're quite likely to pull back when the likelihood of those cuts dissipates.

The Volatility Index has crept back above 20, which chases me out of stocks.  I've seen and experienced too much damage to my trading capital in the past when the VIX moves through 20, so I rarely take chances with this development.  Again, I view this as a short-term issue.  I believe rates will continue to drop, but that those cuts may be on delay based on the latest market action.

I remain very bullish long-term and, quite honestly, I'm not sure I'd ever sell my long-term positiions during the bullish month of November.  While seasonality remains quite bullish, I neveer ignore my #1 indicator - price and volume.  Yesterday was a breakdown in small caps and the others may be soon to follow.

Take necessary short-term precautions.  I'll be writing a StockCharts.com article later today for ChartWatchers, so be sure to check that out.  Also, John Hopkins will be back later today to provide you a brief market update on today's happenings.

Happy trading!

Tom