EB Daily Market Report - Tuesday, February 3, 2026
Executive Summary
- Futures were higher overnight, but we've seen mostly selling since the opening bell
- The Volatility Index ($VIX, +17.44%) is back above 19 and warning us that market makers are pricing in the potential of higher volatility ahead
- Technology (XLK, -3.04%) is under heavy selling pressure, which the bulls really need to reverse
- Semiconductors ($DJUSSC, -3.92%) are leading the selling and that's problematic
- Large cap value (IWD, -0.30%) is significantly outperforming large cap growth (IWF, -2.28%)
- Consumer stocks are also acting quite defensive; staples (XLP, +1.80%) are crushing discretionary (XLY, -1.13%)
- Cryptocurrencies are under big-time selling pressure again as well, with bitcoin ($BTCUSD, -5.19%) threatening major support at 74,000 - more on this below
- Commodities are surging as silver ($SILVER, +9.22%) and gold ($GOLD, +6.67%) both recover from recent heavy selling
- Crude oil ($WTIC, +1.46%) is back above $63 per barrel, helping propel energy (XLE, +2.05%) to the top of the sector leaderboard
- Palantir (PLTR, +6.88%) and Teradyne (TER, +10.70%) are among the S&P 500 leaders after posting excellent quarterly results and raising guidance
Market Outlook
I don't spend a lot of time on cryptocurrencies, but it's certainly worth mentioning that bitcoin ($BTCUSD) has reached a very critical point technically on its chart. In 2024, bitcoin struggled to clear overhead price resistance at 74,000, but once clearing, it soared initially near 110,000. That level at 74,000 then held as price support on the subsequent low in early April. After the bulls then sent bitcoin into the stratosphere just above 125,000, traders have completely abandoned cryptos altogether and we now find bitcoin back down to challenge this 74,000 level. Check it out:
I don't trade cryptocurrencies, but if I did, I'd be a buyer of bitcoin here with a very tight stop. This is exactly where I'd fully expect buyers to support bitcoin. If they don't....and this risk asset takes another big hit to the downside, I simply have to wonder when contagion effects roll over into U.S. stocks.
Sectors/Industries
While I have continually been expressing caution regarding U.S. stocks, because of several "beneath the surface" signals, I also want to mention that nothing has changed for me as far as the long-term picture goes. I absolutely LOVE the fact that transports ($TRAN) are moving and breaking out to all-time highs. That's a testament to the strength of the U.S. economy and/or the future strength of the U.S. economy. Sometimes, a good thing can be bad for stocks, however. For instance, if the economy is expected to gather steam later this year, driving transports higher, then does that signal no more rate cuts?
Keep in mind that earnings and interest rates ultimately drive stock prices. Valuations are based on expectations of both. If the economy is thought to be strengthening, but would be a good sign for the bottom line of Corporate America. But if valuation models have used lower interest rate expectations, that can be problematic if those rate cuts become less and less likely. All of a sudden, those future rising earnings are not nearly as attractive and valuable as they once were. That's where the disconnect can come in.
I'm willing to keep watching ALL signals in determining our market forecast, but I'm still seeing nothing to change my view that we could see short-term trouble (maybe just consolidation) ahead. Take a look at the transports, though:
This is bullish longer-term, plain and simple.
ChartLists and Trading Strategies
I'd continue to look outside technology for potential trades. Semiconductors ($DJUSSC) have still been working, but they come with inordinate risk, especially if my warning signals prove true and a significant decline is ahead.
In the meantime, I'd pursue areas like energy (XLE), materials (XLB), industrials (XLI), health care (XLV), and consumer staples (XLP) and I'd look to keep position sizes smaller than usual. If the overall market does turn lower, most everything will likely drop, but these areas may hold up better on a relative basis.
I ran our Downtrend Reversal scan against the following ChartLists:
- Strong Earnings (SECL)
- Strong AD (SADCL)
- Raised Guidance (RGCL)
3 stocks were returned, all in the materials sector - HL (99.2), USAS (98.4), and TROX (94.3). HL and USAS are part of the miners, which had been so hot over the past several months. I like HL, but I'd exit quickly if the 50-day SMA is lost. TROX is in specialty chemicals and avoids the truly volatile miners, but today shows a false breakout. TROX is showing improving relative strength, so another pullback to 6.00 OR a confirmed breakout might be worth considering.
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Economic Reports
None
Happy trading!
Tom