Searching for Market Moves in 3 Upcoming Catalysts
It is tough trading currently, but there are several events coming up that should create additional volatility.
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Market action is negative on Tuesday morning but is improving, with all the indices off their early lows. Breadth is poor at around 3,300 gainers to 6,000 decliners, and the pockets of speculative action have contracted. The Magnificent Seven MAGS names are lagging while the DJIA is leading.
The market is at a tricky juncture as the indices are holding up nicely but are having a difficult time generating additional momentum. The Israel-Iran news flow is creating increased emotion, but the impact on the market is murky and very uncertain in the short term.
There is a Fed policy decision on Wednesday afternoon that will put economic growth and inflation back in the spotlight, but it is widely expected that the Fed will make no changes in policy at this time and will reiterate that it is waiting for more data before it makes any decisions.
There are three issues that are going to create some near-term market movement. The first will be additional economic news. The bears are still waiting for the poor data they have predicted for so long. Retail sales numbers did come in a bit light on Tuesday morning, but there are still only minor signs of flowing in jobs, and inflation has been much better than expected. It is very likely we see some poor data at some point that will trigger greater bearish confidence and more aggressive selling.
Another event that will create some market movement is the rebalancing of the Russell Indices. The 2025 Russell U.S. Indexes reconstitution takes place after the U.S. market closes on June 27, 2025, with the newly reconstituted indexes effective at the market open on June 30, 2025. This reconstitution affects thousands of stocks and typically creates the highest volume day of the year for the Nasdaq.
While the Russell rebalancing has a short-term impact, it does create additional volatility and often sets up some interesting technical patterns in individual stocks. I’ll be reviewing the many candidates for inclusion and watching for some trading opportunities.
A third potential catalyst will be second-quarter earnings reports, which will start in about three weeks. My approach is to start positioning in some of my favorite names, which I believe are most likely to have solid reports. Quite often, thinner, small caps will languish due to a lack of news flow but will start to anticipate the next earnings report.
A good example is Xeris XERS, which sold off after issuing very solid long-term guidance. It was a sell-the-news reaction, but it is recovering on Tuesday, and I will look to position in additional shares prior to its earnings report, which probably won’t hit until August.
In the meantime, my primary task is to manage existing positions, which are mostly doing well, and to keep hunting for some new trade ideas. Current technical conditions are not producing many great entries, but it is more important to track some potential ideas right now rather than rush to put more cash to work.
The indices are rolling over again as I write. We need some catalysts to hit and shake things up before we will have a better trading environment.
At the time of publication, DePorre was long XERS.
