by Danny Riley

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.

End of the month T+1 bought RTY

Follow @MrTopStep on Twitter and please share if you find our work valuable!

Our View

Fun, fun, fun! The ES and NQ are back and filling, it’s the end of January, T+1, and they rotated into the Russell while the Trumpster is slapping 25% tariffs on all products coming from Mexico and Canada and AAPL reported beats with record revenue of $124.3B and $2.40 earnings. If you are looking for some quiet time, I hate to tell you, but you may as well take a cruise ship to the Bahamas, sit your ass down on a pool chair, and start ordering some cocktails because 2025 is going to be the year of market chaos.

I do my best to not pull anything from the internet. That doesn’t mean I don’t pull some yield prices or check where Bitcoin closed, but I don’t EVER, ever have the TV on. I don’t care what anyone from Bloomberg or CNBC has to say. In fact, when I was doing my videos from the CME floor, a guy from Bloomberg asked if I wanted to go on. My response was, “Notta!” If these guests were any good at trading their own accounts, they would not have time to do it. Just look at Jon and Pete Najarian… where the hell did they go?

Trading is never going to be simple, but when you get your own methodology and it works, stick with it. For me, less is better. Jim M, who has been in the MrTopStep room since 2010, loaded my charts up with indicators and signals last year, and some of them would call the high and the low, but my head would spin with all the other shit he put on the charts. It would take me a long time to learn, if ever, and I just went back to my old ways of buy and sell imbalance and overbought and oversold and stuck with the number one rule: the trend is your friend. If you are fighting that, then you’re probably struggling.

Like most of the week, the ES and NQ were in buy-the-dips and sell-the-rips mode, but later in the day, the ES and NQ were not far off the highs when the headlines hit, saying Trump had placed a 25% tariff on Canada and Mexico, the US’s two largest trading partners, and that he was deciding whether to tax their oil. The ES sold off 30 points, and the NQ dropped about 150 points in less than 5 minutes, and oil rallied but ended up closing near the highs of the range. The ES settled at 6093.25, up 25.75 points or +0.42%. The high in the NQ was 21,747.75 and settled at 21,808.75, up 85.50 points or +0.40%. The YM closed up 175 points or +0.39%, and the big winner, the RTY, closed up 21 points or +0.93%.

Our Lean

After Powell’s press conference following this week’s Fed meeting, the Fed chair did his best to avoid talking about the effects of Trump’s tariffs and what they could do to rates and the economy. Is Saturday Trump tariff day? Powell said, “There are just too many variables, so we’re just going to have to wait and see.” Trump has been playing a game of wait and see, but earlier in the week, White House press secretary Karoline Leavitt told reporters that Feb. 1 appeared to be “still on the books,” and Trump himself said those tariffs (oil) are coming on Saturday. Last week, Trump was threatening Colombia, and Colombia started threatening back, but the two nations came to an agreement. Trump is a deal maker and clearly is using the tariffs as a negotiating tool. The logic behind this round is tied to getting Canada and Mexico to clamp down on the flow of drugs and migrants at their borders and the US trade deficits with the two countries, but knowing Trump, there are other reasons. I have no idea how this is going to affect the US economy, but he has been very straightforward about what he wants. He also wants lower rates. I’m not smart enough to figure this out, but we already know how the markets reacted to the December rate cut, and now is not the time for that. My lean remains the same as yesterday, if there’s a lower open, buy it. If we don’t get one and get a gap higher, you can give it a shot but this rally is not over. 6180, 6193, 6204, and 6220 are some levels I am looking at. On the downside, I think any 30- to 40-point pullback would be a decent entry.

Our lean: The last trading day of January, PCE, and the options expiration are on tap. I think the higher lows have been working on the upside, and we could see higher prices, but I also think there is all sorts of headline risk, which buying into those drops has worked nicely. I can’t rule out some two-way flow, but 6150 and new all-time highs are not far off. Remember, the trend is your friend.

MiM and Daily Recap

The ES futures opened the Globex session at 6068.50 and initially moved lower, finding an early low at 6086.00 at 5:20 AM ET before bouncing to 6093.00 at 5:35 AM ET. A second dip followed, reaching 6087.00 at 6:00 AM ET before buyers took control and pushed the ES to a Globex high of 6094.75 at 6:15 AM ET. After some consolidation, the market pulled back again, hitting a pre-market low of 6074.25 at 7:15 AM ET.

The regular session opened at 6089.50 at 9:30 AM ET and saw an early rally to 6109.75 at 9:50 AM ET, marking the session’s first significant high. However, sellers quickly stepped in, leading to a sharp decline that bottomed out at 6056.50 at 11:10 AM ET, the lowest level of the session. From there, the ES rebounded sharply, rallying back to 6093.25 at 11:55 AM ET before rolling over again.

A secondary midday low formed at 6070.25 at 12:25 PM ET before another push higher sent the ES to 6102.75 at 2:10 PM ET. The market briefly pulled back to 6096.00 at 2:30 PM ET before staging an afternoon rally, hitting the session high of 6116.25 at 3:20 PM ET. Around 3:40 PM Trump’s press secretary reminded the world that Trump tariffs were still on schedule to hit on February 2nd and that sent the market tumbling about 50 points in less than 5 minutes. The Bulls did not take it lying down and rallied back 40 of the lost points in 15 minutes into the MIM at 15:50 which showed almost $2B to sell, with a bullish symbol lean. The ES showed resilience, closing the cash session at 6099.25, up 31 points from yesterday’s close, gaining 0.51% on the day.

In the end the ES and NQ were up, down and all around. In terms of the ES and NQ they were firm and seemed to be trying to back and fill. In terms of the ES’s overall trade volume was in line with the last two weeks at 1.57 million contracts traded.The yield on the 10-year note declined to 4.515% and Bitcoin settled at $105,092 up 1.26%.

How to read the MIM

Technical Edge

Fair Values for January 31, 2025

SP: 28.9
NQ: 115.58
Dow: 162.87

Daily Breadth Data 📊

NYSE Breadth: 72% Upside Volume
Nasdaq Breadth: 69% Upside Volume
Total Breadth: 69% Upside Volume
NYSE Advance/Decline: 78% Advance
Nasdaq Advance/Decline: 66% Advance
Total Advance/Decline: 71% Advance
NYSE New Highs/New Lows: 141 / 25
Nasdaq New Highs/New Lows: 156 / 108
NYSE TRIN: 1.16
Nasdaq TRIN: 0.88

Weekly Breadth Data 📈

NNYSE Breadth: 59% Upside Volume
Nasdaq Breadth: 61% Upside Volume
Total Breadth: 60% Upside Volume
NYSE Advance/Decline: 65% Advance
Nasdaq Advance/Decline: 62% Advance
Total Advance/Decline: 63% Advance
NYSE New Highs/New Lows: 262 / 52
Nasdaq New Highs/New Lows: 369 / 236
NYSE TRIN: 0.96
Nasdaq TRIN: 0.94

Guest Posts:

SpotGamma Founders Note:

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night’s Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Futures are +50bps higher, pressing the SPX to 6,100.

AAPL is +3.8% to $246 after earnings.

Resistance: 6,120, 6,150, 6,200

Support: 6,050, 6,020, 6,000

With the SPX tagging 6,100 this AM, our sights set on 6,120 – 6,150 as the next major high. A move over 6,100 is significant, as it implies that longer term (and therefore more stable) positive gamma in invoked. You can see this in our base gamma curve below, wherein absolute positive gamma (supplied by total calls) peaks into 6,200. This, vs the transient 0DTE contracts that have been supplying the bulk of positive gamma.

To sum it up, this positioning likely leads to a decline in realized volatility, which further supports SPX prices. It also likely means that vol is actually going to decline, which we flagged yesterday as not having yet happened.

Our gut here is that we are about to enter into a “blow off” top.

Lets review:

“StarGate” led to an AI chase last week, and that bubble was violently popped by the DeepSeek news. However, we believe (and the evidence shows) that the violent drop on Monday was a function of the extreme overbought conditions into Friday (i.e. huge call buyers got stuffed hard + leveraged ETF unwind).

You can see on the bottom left Monday’s (1/27) nasty -16% decline in NVDA, and correlated ~3% drop in QQQ, followed by the sizable rebound on Tuesday (top right, 1/28). The argument here is that equities can “leave NVDA behind”.

The 1-year correlation between NVDA & QQQ is 74, as NVDA is a top 3 weight in the SPY/QQQ. Compare this to TSLA or AAPL, which have correlations near of 50. The idea is that NVDA can simply become part of the pack, as opposed to the leader.

On this point, now that the dust has settled, traders appear to be seeing DeepSeek as an “NVDA problem” and not a “market problem”. Plus, yields are very quiet after Powell, which is an “all clear” for short term buyers. With that, SPY & QQQ are within ear-shot of all time highs. The DeepSeek spasm did create a dip in non-NVDA stuff to buy, and so now we are seeing that buying translate into upside momentum.

Look at the 1-week performance of DIA & IWM, wherein NVDA & chips are not really a factor – DIA barely went negative on Monday.

This creates a “musical chairs” problem.

Shown here is COR1M – the CBOE correlation metric. It models the correlation between 1-month IV’s in the top 50 US stocks vs the SPX IV. When it declines sharply, we see it as a signal that bubble conditions are forming.

This was a huge point of discussion into July ’24, as NVDA and the chip sector freaked out to the upside. That led to this correlation metric breaking 2017 lows and setting the stage for the August VIX explosion.

As you can see, this correlation metric is back below 2017 lows. We reference 2017 as it contained the lowest realized volatility (RV) ever in the SPX of ~3.5% (1-month RV). Additionally, this COR1M metric never came close to those 2017 lows until July ’24.

Today’s 1-month RV at 14%, is much higher than 2017, but the fact that COR1M is lower (near record lows) given the higher RV (and recent market drop) is interesting. One would expect correlation to snap higher into a major selloff, but again, this is a rotation so correlation is instead plunging to lows.

The idea here is that these correlation lows are signal of bullish impulses – impulses that generally conclude with a sharp equity correction which results in all equities selling off, and correlation snapping higher. There is no set trigger for this to happen, and until it happens equities can rock higher (thus the “musical chairs” reference).

We quickly compared COR1M to the SPX (purple) below, and you can see that on approach of 2017 lows (black dotted line) the SPX seems to respond with a sharp drop. You can even see this happened at the start of Jan, when NVDA tagged 150 into the CES conference off the back of massive call trading.

The summary here is that we have our toe in the bullish waters, trying to ride the wave while aware that a bubble can be blowing. From our chair the near term catalysts are NVDA earnings + Feb OPEX, but we will also be weary of macro prints like NFP (2/7) or CPI (2/12).

Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Trading Room News:

Polaris Trading Group Summary – Thursday, January 24, 2025

Market Overview & Early Session:

The overnight session hit both upside (6095-6105) and downside (6055-6045) targets with precision. A key pivot level at 6075 was identified as the “Line in the Sand,” aligning with the PTG Daily Trade Strategy.

For the bullish scenario, holding above 6075 targeted 6095-6105. For the bearish scenario, dropping below 6075 targeted 6055-6045.

Morning Trades & Execution:
Crude Oil (CL) OPR long trade successfully scaled two targets, and all upper targets were hit.

In ES and NQ action, early MATD rhythms were anticipated and played out. Buyers aggressively raised bids, pushing price action higher. The NQ rejected a key level (D-Level), leading to quick moves back down. An objective was fulfilled at 21,500 before price quickly reversed.

Midday Review & Lessons:
PTG David emphasized focusing on a single pattern and perfecting it for consistent success. The DTS plan unfolded flawlessly, with a retest of CD1 low (6054) before a sustained rally.

A dip below VAL (6064.50) and reclaim provided a PKB long structure opportunity.

Afternoon Volatility & Tape Bomb:
Market maintained MATD range day rhythms, with the best trades occurring at range extremes.

At 2 PM, the “Shake n Bake” move led to a bullish push into the final hour. The prior high at 6111.50 was tagged, setting up for a potential breakout.

At 3:38 PM, Trump announced 25% tariffs on Canada and Mexico, triggering a rapid sell-off. Markets plunged and then snapped back 25 handles just as fast.

A final reminder from PTG David: Always use hard stops—no such thing as a “mental stop.”

Closing Thoughts:
The session saw precise execution of strategy, with multiple opportunities in ES, NQ, and CL.

Key takeaway: Stick to high-probability setups and be prepared for sudden market-moving news.

The 2025 trading landscape remains volatile—fasten seatbelts and trade accordingly.

HAGEE. 🚀

DTG Room Preview – January 31, 2025

US stock indices closed higher on Thursday, digesting big tech earnings, though the session ended with some uncertainty after former President Trump hinted at a possible 25% tariff on Mexico and Canada. This pushed gold to record highs above $2,800/oz.

In tech news, it was revealed that DeepSeek used Nvidia’s H20 chips, designed specifically for China, raising concerns among US lawmakers who may impose new restrictions. Japan is also considering export controls on chips sold to China, which China’s Ministry of Commerce warned could harm business relations. Meanwhile, both Meta and Microsoft acknowledged DeepSeek’s efficiency improvements and said they could benefit from similar innovations.

OpenAI is reportedly in talks with SoftBank for a $40 billion funding round, which would value the AI giant at around $300 billion—double its valuation just months ago. OpenAI also plans to invest in Stargate, a $500 billion joint venture with Oracle and SoftBank that was recently announced by Trump.

Apple shares jumped over 3% after beating earnings expectations, despite lower iPhone sales and declining revenue from China. Several analysts had downgraded Apple before the report. The company plans to release new products, including an entry-level iPhone SE, new iPads, and MacBook Airs.

Premarket corporate earnings today include Chevron (CVX), ExxonMobil (XOM), Phillips 66 (PSX), ABBV, AON, BAH, BR, CHD, CL, BEN, LYB, NVS, RBC, RVTY, SNOW, and GWW.

On the economic front, key reports include the Core PCE Price Index, Employment Cost Index, and Personal Income & Spending at 8:30 AM ET, followed by the Chicago PMI at 9:45 AM ET. Fed Governor Michelle Bowman is also scheduled to speak at 8:30 AM ET.

Market volatility remains steady and elevated, with the ES 5-day average range at approximately 87 points. Whale bias is leaning bullish heading into the 8:30 AM ET economic releases, though overnight large trader volume has been relatively light. The ES continues to grind higher within both its short-term and intermediate-term uptrend channels.

ES – Week over Week

The bull/bear line remains at 5895.75, serving as the key pivot that separates a broader bullish backdrop from a more defensive stance. As long as ES holds above this level, buyers remain in control, but a sustained move below would shift momentum in favor of the bears.

In the pre-market session, ES is trading near 6126.25, showing resilience after recent upward movement. The first major resistance to watch is at 6119.25. If buyers can push beyond this level, the next upside target comes in at 6156.50, which aligns with prior resistance. A strong continuation above this level would open the door toward 6215.50, with further potential to stretch into 6206.25 if momentum accelerates.

On the downside, the initial level of support sits at 6094.10. If price slips below this area, sellers may gain traction, leading to a test of 6068.50. Should weakness persist, 6056.50 comes into play as another key support level, with further downside risk extending toward 6032.00. If price breaks through these levels, the next area of significance is 5972.50, which could act as a major inflection point for the session. A deeper selloff would bring 5944.75 into focus, with the ultimate line in the sand remaining at 5895.75. A move below that would indicate a shift in control, favoring the bears.

For today, bulls need to hold above 6094.10 and reclaim 6119.25 to keep the momentum going. If sellers take control and push price below 6056.50, it could signal a shift toward lower levels, with downside targets extending toward 5972.50. As always, the bull/bear line at 5895.75 remains the key dividing point between bullish and bearish territory.

NQ – Week over Week

Yesterday, we discussed how ES was maintaining strength with a key bull/bear line at 5895.75, acting as the pivotal level separating bullish control from a potential shift toward weakness. In the pre-market, ES was trading near 6126.25, showing resilience after its recent upward movement. We identified resistance at 6119.25, with the next upside target at 6156.50, and a stronger push aiming for 6215.50. On the downside, the first level of support was at 6094.10, with additional levels at 6068.50 and 6056.50, marking key zones where buyers needed to hold in order to prevent a deeper decline toward 5972.50.

Today, looking at the NQ chart, the market setup presents a similar battle between bulls and bears, but with key levels adjusted accordingly. The bull/bear line now sits at 22080.50, acting as the primary dividing point for directional bias. If buyers can hold above this level and sustain momentum, the next significant resistance comes in at 21971.00, followed by 21819.50, which could provide a challenge if momentum begins to fade. A strong push beyond these levels could extend the rally toward 22312.50, offering a broader target for bullish continuation.

On the downside, initial support rests at 21608.50, a level that must hold to prevent sellers from gaining traction. A move below this area would likely bring 21547.75 into play, with further downside exposure toward 21414.75. If weakness continues, a test of 21209.50 could unfold, opening the door for a larger retracement. Should sellers push aggressively, the next major support area sits at 20807.25, marking a potential inflection point where buyers may attempt to re-establish control.

The market’s ability to reclaim strength above 21971.00 will determine if buyers can build upon recent gains, while failure to hold above 21608.50 may invite increased selling pressure. The battle around 22080.50 remains the most important factor for today’s session, as any sustained movement above or below this level will dictate the broader market sentiment.