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Biden vs. Trump: The Market’s Struggle to Adapt
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Our View
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I could be totally off base, but I think the markets are adjusting to a new reality—Biden’s nonstop spending versus Trump’s drain-the-swamp policies.
Trump attempted to drain the swamp during his first administration, but the Democratic pushback was too strong. While his tariffs may seem disruptive, he views them as a way to level the playing field. It’s a whole new ballgame that is very unpredictable.
The Biden administration was pumping up the economy with billions of dollars, giving the public a false sense of security while lowering rates when the economy was already sending mixed signals. I never thought it was a good idea to lower rates, and when the Fed projected five rate cuts at the end of 2023, I said they wouldn’t cut at all. Yes, the economy was strong, but the Fed was lowering while inflation was still climbing. Now, Powell is essentially saying there will be no rate cuts in 2025. To me, he has lost all credibility.
Yesterday’s CPI release was a wake-up call. While the stock market may have rallied, it doesn’t change the inflation situation. I read something a few days ago about eggs costing $12 per dozen. I’m sure that’s not the norm, but no matter what anyone says, prices are going up.
We all know that hundreds of billions have been squandered by both Democrats and Republicans. And we all know that hundreds of millions have been made on both sides of the aisle.
Our Lean
I think 80% of 2025’s down opens have been a buy. Some rallied right from the open, while others chopped around for the first hour before taking off. Today, there are no Fed speakers, but we do have the PPI number to deal with.
Our Lean: This 6020-6100 range can’t last forever, and my guess is we still take out the stops above 6100, but when? It’s 8:00 PM, and the ES has a 6086 high. One good buy program and the ES could blast through resistance, but so far, it’s been a brick wall. That will change.
Our lean remains the same: I still think you buy the 40- to 60-point pullbacks, but I can’t rule out another drop or a tape bomb. Trade what you see, not what you think, the patterns are very defined.
There is also a 10-year note auction today. I took this from Twitter:
The United States has a $66B 10-Year Bond from February 2015 coming due tomorrow.
It had a 2.00% fixed coupon.
It is going to be replaced with another $66B 10-Year Bond, but this time with a 4.55% fixed coupon.
This one single rollover will add an extra $1.67B per year to the national debt for the next 10 years.
Bond auctions like these are happening every single day.
We are just beginning to pay the price for a decade of ZIRP.
All of that debt now costs taxpayer money.
Just wait for the 2032-2035 vintages when we’re paying 5% for all the debt we took out when we had 4% unemployment and 3% real GDP.
There is really only one trade here. It’s to own hard money.
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Gold (for risk-off).
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Bitcoin (for risk-on).
Own both. And own stocks as long as policymakers continue to run the economy hot on borrowed money, this is great for stocks, as long as it lasts.
MiM and Daily Recap
The S&P 500 E-mini Futures (ES) began the overnight session near 6090.75 and initially pushed up to 6098.00 after the hot CPI number at 8:30 a.m. ET. Sellers stepped in aggressively, driving the market to an early morning low of 6020.75 by about 9:05 a.m. This marked a notable drop of roughly 77 points (a 1.27 percent move) in less than an hour.
Following that early low, buyers staged a substantial rebound. By 10:36 a.m., the ES climbed to 6072.25, recouping more than 50 points (0.86 percent). However, the momentum quickly reversed again, and by late morning (around 11:27 a.m.) the price slid to 6040.00. That pullback of roughly 32 points (0.53 percent) once again set the stage for a renewed push higher.
The midday rally proved more durable, as the ES reached 6084.75 near 1:00 p.m. for its next swing high, an advance of about 44 points (0.74 percent) off the late-morning low. Markets then seesawed in the afternoon, pulling back to around 6046.25 at 2:06 p.m. before another rally to 6081.00 near 2:48 p.m. This choppy pattern continued, with the ES dipping again toward 6030.75 and then making a final late-afternoon push to close the full day session at 6082.00.
The 4:00 p.m. cash session closed at 6072.75, which was a 19.75-point drop (−0.32 percent) from the previous day’s cash close, but an impressive 42-point gain from the gap-down open.
At 3:50 p.m., the Market On Close (MOC) data showed a total imbalance of 436 million dollars, with 68 percent on the buy side by dollar volume. That reading was fairly strong in terms of capital flow, although the symbol imbalance stood at 56.9 percent, which is below the 66 percent threshold typically considered a strong signal. As a result, the closing stretch saw some lift but not a robust surge, leaving the ES to settle below the prior day’s final print.
The CPI report came in hotter than expected, rising 3 percent year-over-year in January. This marks a pivotal moment in the Fed’s fight to lower inflation. The yield on 5- and 10-year notes rose 10 basis points, and traders pushed their rate-cut expectations from September to December. Personally, I don’t believe there will be any cuts.
In the end, it was another big down open followed by a big rally. In terms of the ES’s overall tone, it was firm. In terms of trade, volume was on the high side at 1.5 million contracts. The 10-year note jumped above 4.6 percent, Bitcoin is trading around 97,000, and gold took a breather, with gold futures settling 0.1 percent lower at 2,932.60.
Technical Edge
Fair Values for February 13, 2025
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S&P: 19.59
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NQ: 79.19
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Dow: 88.95
Daily Breadth Data 📊
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NYSE Breadth: 40% Upside Volume
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Nasdaq Breadth: 63% Upside Volume
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Total Breadth: 52% Upside Volume
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NYSE Advance/Decline: 29% Advance
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Nasdaq Advance/Decline: 41% Advance
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Total Advance/Decline: 36% Advance
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NYSE New Highs/New Lows: 62 / 86
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Nasdaq New Highs/New Lows: 113 / 210
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NYSE TRIN: 0.49
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Nasdaq TRIN: 0.43
Weekly Breadth Data 📈
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NYSE Breadth: 49% Upside Volume
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Nasdaq Breadth: 57% Upside Volume
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Total Breadth: 53% Upside Volume
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NYSE Advance/Decline: 51% Advance
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Nasdaq Advance/Decline: 48% Advance
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Total Advance/Decline: 49% Advance
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NYSE New Highs/New Lows: 204 / 166
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Nasdaq New Highs/New Lows: 344 / 394
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NYSE TRIN: 1.06
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Nasdaq TRIN: 0.75
Guest Posts:
Dan @ GTC Traders
The Fed Has Made (Another) Policy Error
For months we have been warning that the Federal Reserve was in danger of making (another) policy error.
We repeated this warning many times since September of 2024. Inflation was never ‘tamed’. Cutting the rate too soon would risk inflation re-igniting and begin to follow Core higher still … far away from the 2.0% Inflation objective.
Yes … we are taking (another) victory lap. We were right. The Fed was wrong.
Make no mistake. Many like to ‘claim’ to be correct on their persistent critique of the Federal Reserve. Few can specify their thoughts into anything other than a general cognitive bias against ANY Federal Reserve. Wherein we have specifically outlined each misstep they have made the risk of those mistakes.
Yesterday, reports were released that the annual inflation rate in the US edged up to 3% in January 2025, compared to 2.9% in December 2024, and above market forecasts of 2.9%.
The problem now, is that as we have warned in the past, is that Inflation has become structural. To reiterate and as a reminder? Structural inflation is a persistent rise in prices caused by deep-rooted inefficiencies and rigidities in an economy, such as labor market constraints, supply chain bottlenecks, institutional policies, and monopolistic pricing power. Thus the term ‘structural’. It is embedded into the very ‘structure’ of the economy. So unlike demand-pull or cost-push inflation, structural inflation is not easily controlled by monetary or fiscal policies because it stems from fundamental economic imbalances. We now have to deal with reduced economic growth, declining real wages, misallocation of resources, as businesses and consumers struggle to adjust to long-term price pressures. Additionally, structural inflation can lead to entrenched inflationary expectations, making it difficult for policymakers to restore price stability without significant structural reforms.
Such as Seagate (STX), which we also purchased yesterday for the same reason. Seagate (STX) does not provide as much yield at 3.02% annually. But Seagate (STX) provides us with more upside, allows us to be exposed to tech hardware … and provides more upside …
Where do we go from here?
It’s hard to say, and we’ll have to see what the next three months bring. Perhaps the new administrations policies will provide some disinflationary pressure. We do still believe that the Fed needs to raise the rate, and they need to do so immediately.
So make no mistake. The Fed has committed a grave policy error in cutting the rate too fast, and too soon.
Until next time? Stay safe … and trade well.
Trading Room News:
Polaris Trading Group Summary: Wednesday, February 12, 2025
Morning Session: Volatility on CPI Release
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The session began with a precise “Touch n Go” at the 6075 lower target, aligning with the overnight activity.
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The US CPI report came in hotter than expected (YoY 3% vs. 2.9% forecast, MoM 0.5% vs. 0.3% forecast), triggering a sharp selloff.
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PTGDavid reacted with “Down Goes Frasier!”, highlighting the market’s rapid decline.
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Lower targets 6027.75, 6020-6015, and 6023 were swiftly hit, fulfilling both the Cycle Day 1 Average Decline and 10-Day ATR.
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Traders noted tight price coiling around 6025-6030, near last week’s midpoint, hinting at possible breakout conditions.
Midday: Two-Way Action & Rejection at Key Levels
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A Buy Response off the 6023 target pushed price back up to 6057, but rejection sent it back down to the 6035 Open Range High.
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PTGDavid anticipated increased two-way traffic, signaling caution for traders.
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Traders discussed bear stackers, white line, and bold arrow signals, referencing past PTG videos for better pattern recognition.
Afternoon & Close: Leaning Long, Position Squaring
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PTGDavid maintained a long bias into the afternoon session.
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The market retested the Initial Balance (IB) high at 6070.
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As the session neared the close, traders squared positions, leading to a flat MOC (Market on Close) outcome.
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Final closing price settled at 6075, marking a retracement and stabilization from the morning’s selloff.
Key Takeaways & Lessons Learned:
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Pre-market analysis was highly accurate, with the 6075 target hit overnight.
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Quick fulfillment of ATR and CD1 levels confirmed strong directional movement post-CPI.
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Rejection at key levels (6057, 6035) created excellent trading opportunities for intraday traders.
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Technical discussions on pattern recognition reinforced the importance of continued learning.
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Market structure awareness (tight coil, breakout potential, rejection zones) was essential for strategy execution.
Overall, it was a strong session with multiple trade opportunities, particularly in response to CPI-driven volatility.
DTG Room Preview – Thursday, February 13, 2025
Market Recap & CPI Impact
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CPI Data Shock: Inflation came in hotter than expected, sending stocks lower. The Dow Jones and S&P 500 each fell 0.5%, while the Nasdaq managed to close slightly positive. Core inflation rose 0.4% in January vs. 0.2% in December, marking a 3.3% YoY increase.
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Fed’s Stance: Jerome Powell told lawmakers that the Fed is “close but not there” on inflation, reaffirming the need for restrictive policy. Meanwhile, Trump called for lower rates, tying the move to upcoming tariff policies.
Politics & Treasury Moves
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Elizabeth Warren urged the Fed to cut rates, but Treasury Secretary Scott Bessent stated the administration is focused on lowering long-term borrowing costs via the 10-year Treasury yield, not short-term rates.
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Powell declined to comment on how Trump’s tariffs might impact inflation.
Overnight Market Moves
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Oil & Treasury yields are down, while gold and the US dollar are up after a phone call between Trump and [undisclosed party].
Notable Stocks & Earnings
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Robinhood (HOOD) surged 14% after hours, beating expectations on a 700% surge in crypto trading—a sign of optimism for a pro-crypto administration.
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Airbnb (ABNB), Applied Materials (AMAT), Coinbase (COIN), DraftKings (DKNG), and Roku (ROKU) report earnings after the bell today.
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Egg prices hit a record high at $8.15 per dozen, with expectations of further increases.
Upcoming Economic Data
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Producer Price Index (PPI) & Weekly Jobless Claims set for release at 8:30 AM ET.
Market Sentiment & Volatility
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ES 5-day average range is steady at 64 points.
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No clear whale bias—overnight large trader volume is leaning bullish but remains too light to be meaningful.
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ES remains in a bearish trend following the CPI reaction—market response to today’s PPI will be key.
ES -Week to Week
The intraday bull/bear line now sits at 6067, serving as our key pivot between a bullish bias and a more defensive stance during today’s price action. As long as price holds above 6067, buyers retain the upper hand; a clear move below would tilt momentum in favor of the bears.
Currently, price is hovering near 6069.00. On the upside, the first target to watch is yesterday’s high at 6098. A break above that opens the door toward 6114.75 which is our upper range target on the day. If momentum accelerates, we could see a push toward the upper resistance near 6160.50 in the coming sessions.
Should we slip below the 6065–6060 zone, look for support around 6041.25, followed by 6019.50 which is our downside daily range target. Below there, 5994.25 becomes the next downside marker, with a more significant drop risking a test of the bull/bear line near 5974. Only if sellers push decisively beneath 5894.75 should one adopt a more cautious or bearish stance for a longer-term trend.
NQ – Week to Week
The long-term bull/bear line remains at 22,080.50 on the NQ chart, and price is still trading below it, suggesting caution on the long side until we see a solid break and hold above that level. Currently, price sits near 21,814.75 in the pre-market.
Today’s intraday bull/bear line is 21,757.50. On the upside, the first reference area is around 21,804, which is yesterday’s close. Above that is yesterday’s high at 21,862.50, followed by 21,932. The upper range target is 22,003, with 22,080 as the key level to reclaim for a more sustained bullish move.
For downside support, watch 21,600 first. Below that, the lower range target is 21,511.75. Mark the Globex highs and lows into the cash open for an indication of where stops are positioned.
Calendars
Economic Calendar Today
This Week’s High Importance
Earnings:
Released
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Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!
This post goes out as an email to our subscribers every day and is posted for free here around 2 PM ET. To get your real-time copy, sign up for the free or premium version here: Opening Print Subscribe.
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