by Danny Riley

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Powell’s Presser and Earnings Galore: A Market on Edge

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Our View

There were some decent rallies to sell yesterday but buyers showed up again for a few reasons: 1. after a big drop, there is often a tendency to rally, 2. thin to win, and 3. foreign money is still moving into the U.S., with investors buying dollars.

I don’t think Monday’s drop was the end of the world, but it clearly cast doubt about the cost and development of AI. We live in a highly competitive and evolving world, and Monday’s decline proved that point. Will NVIDIA regain the $800 billion in market cap it lost? I don’t know, but if it does, it won’t happen overnight. Will the ES and NQ recoup their losses? I think so, but it’s going to take time.

What Monday’s selloff did was create doubt in what has been the hallmark of the almighty “Magnificent 7” or 10 which in itself is a problem. As I’ve often said, the S&P 500 doesn’t like uncertainty and losing $1 trillion in market cap in a single day doesn’t do anything to instill traders’ confidence.

2 PM today is the first FOMC rate announcement of the year widely expected to be a non-event with a no-change position, but watch the clock. There will be a presser.

Our Lean

Today is all about what Fed Chair Powell has to say at 2:30 PM, and a bundle of significant earnings reports. Microsoft, Tesla, Meta, ASML, IBM, and many others are set to report. After sky-high valuations in 2024, with some stocks jumping 30% to 150%, and Monday’s debacle, traders are on edge. I’m not saying some of the high flyers won’t beat expectations. My question is: do they sell the news? Like I keep saying, when NVDA loses $800 billion in market cap and the stock market loses $1 trillion in one day, it’s not like what happened can be overlooked and written off as just another day.

Our Lean: What I overlooked yesterday in the lean was all the traders who sold late in the day or at lower prices and placed stops just above those levels. When this happens, the algorithms have a tendency to go after the nearby stops and after a few early drops, in came the buy programs. I don’t think the hedgers or all the shorts have covered yet but I also think we could see a two-way trade. If the ES gaps lower, I would look to buy early weakness but this is a very unstable environment even after NVDA rallied 8.9% yesterday. Keep an eye on the 10-year note yield, it’s Powell’s turn.

MiM and Daily Recap

The ES opened its Globex session at 6059.50. After a pre-market higher-low at 9:15 (6051.00), the market rallied up to open at 6057.50 and then prices fell to 6023.50 at 9:48, marking the low of the day. A steady climb took the ES to 6087.25 (11:12) for a higher high, pulled back to 6060.25 (11:39) for a higher low, and then pushed onward to 6090.50 (12:15). Another higher low came at 12:39 (6084.25), followed by a higher high at 13:18 (6099.25). After a midday dip to 6083.75 (14:09), the ES hit a fresh higher high at 15:24 (6105.50), then finished with a lower high (6096.25) and a higher low (6089.75) both at 16:00.

At 15:50, the ES printed 6098.50 as the MIM indicated $2.2B to sell. Over the next ten minutes, the closing auction moved to the buy side as the large tech sell imbalances were paired off. By 15:55, the ES was trading near 6102.25. Prices then slipped as buy-side interest picked up, ending the session at 6096.00.

From a broader view, Globex closed slightly lower at 6057.75 (volume 244,721). Regular hours opened at 6057.50 and climbed to 6105.50 before closing at 6096.00 (volume 1,226,766). The Cleanup session was light (52,594 contracts), ending at 6091.25. Overall, the FULL session ended at 6091.25, up 31.75 points (a 0.52% gain) on total volume of 1,524,081.

NQ closed the regular session at 21,302.75 up almost 1.5% on the day with a total day volume of 649,287

In the end, the markets pushed higher. In terms of the ES and NQ’s overall tone, I think it was more short covering than new buying. In terms of the ES’s overall trade, volume was steady at 1.52 million contracts traded.

How to read the MIM

Technical Edge

MrTopStep Levels:

How to read MTS Levels

Fair Values for January 29, 2025:

SP: 29.87
NQ: 118.5
Dow: 173.61

Daily Market Recap 📊

NYSE Breadth: 44% Upside Volume
Nasdaq Breadth: 64% Upside Volume
Total Breadth: 61% Upside Volume
NYSE Advance/Decline: 43% Advance
Nasdaq Advance/Decline: 49% Advance
Total Advance/Decline: 46% Advance
NYSE New Highs/New Lows: 120 / 26
Nasdaq New Highs/New Lows: 119 / 163
NYSE TRIN: 0.82
Nasdaq TRIN: 0.54

Weekly Market 📈

NYSE Breadth: 58% Upside Volume
Nasdaq Breadth: 60% Upside Volume
Total Breadth: 59% Upside Volume
NYSE Advance/Decline: 65% Advance
Nasdaq Advance/Decline: 61% Advance
Total Advance/Decline: 62% Advance
NYSE New Highs/New Lows: 262 / 52
Nasdaq New Highs/New Lows: 369 / 236
NYSE TRIN: 1.29
Nasdaq TRIN: 1.07

Good Reads:

Guest Posts — Polaris Trading Group

Prior Session was Cycle Day 2: Markets continued this cycle’s rally surpassing targets finding resistance at the 3-Day Central Pivot Zone (6099 – 6106). Range for this session was 82 handles on 1.523M contracts exchanged.

FREE TRIAL link to PTG/Taylor Three Day Cycle

For a more detailed recap of the trading session, click on this link: Trading Room RECAP 1.28.25

…Transition from Cycle Day 2 to Cycle Day 3

Transition into Cycle Day 3: Three-Day Cycle targets have been fulfilled. We’ll mark this session as a “wild-card” given today’s BIG EVENT is the FOMC and Presser.

Nothing changes for PTG…Simply follow your plan.

Below previewing the FOMC Meeting taken from reliable sources across the investing spectrum.

The Federal Open Market Committee (FOMC) is currently holding its first meeting of 2025 on January 28-29. Analysts widely anticipate that the Federal Reserve will maintain the federal funds rate at its current range of 4.25% to 4.50%, following a series of rate cuts in late 2024.

ey.com

Recent economic indicators present a mixed picture. December saw a slight uptick in job creation, with 256,000 positions added, surpassing expectations. However, consumer confidence dipped to 104.1 in January from 109.5 the previous month, missing economists’ expectations.

investopedia.com

marketwatch.com

Inflation remains a focal point for the Fed. The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, is expected to show a 2.6% year-over-year increase for December, marking the third consecutive rise and the fastest annual pace since May. This persistent inflation suggests that rate cuts are unlikely in the near term.

investopedia.com

Additionally, potential policy shifts under President Trump’s administration, such as proposed tariff increases, could influence the Fed’s decisions. Tariffs may exert upward pressure on inflation, complicating the Fed’s mandate to maintain price stability.

wsj.com

In summary, while the Fed is expected to keep interest rates steady in the upcoming announcement, it will continue to monitor economic data and policy developments closely to inform future monetary policy decisions.

PTG’s Primary Directive (PD) is to ALWAYS STAY IN ALIGNMENT with the DOMINANT FORCE.

As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 6090+-, initially targets 6105 – 6115 zone.

Bear Scenario: Price sustains an offer below 6090+-, initially targets 6075 – 6065 zone.

PVA High Edge = 6104 PVA Low Edge = 6070 Prior POC = 6100

ES (Profile)

Thanks for reading, PTGDavid

Trading Room Summaries

Polaris Trading Group Summary – Tuesday, January 28, 2025

Key Themes and Observations:

Bullish Market Dynamics:
- The day opened with a recovery rally, as price sustained above key support levels (6035) and met initial target zones (6065-6070) early in the session. David described this as “highly precise price action.”
- Throughout the day, bulls maintained control, pushing prices higher while respecting key resistance levels.
Strategic Execution and Insights:
- The session featured a successful test of Prior POC/VWAP, confirming strong buying responses and providing opportunities for long alignments on pullbacks.
- David emphasized the importance of monitoring levels like the D Level Money Box (DLMB) and highlighted its role in identifying reversals.
- The “MATD rhythm” (Morning After Trend Day) played out with rotations from prior POC to VWAP zones, supporting precise trade execution.
Afternoon Resilience and Close Dynamics:
- In the afternoon, the relief rally continued, with prices approaching resistance at 6100-6105, which held as predicted.
- Bulls consistently defended key levels (e.g., 6085), applying pressure on shorts, culminating in a short squeeze scenario.
- Into the close, the market saw significant program activity and imbalances ($2.2B Sell Imbalance flipping to $1.2B Buy Imbalance), resulting in a volatile finish.
Positive Trades and Lessons Learned:
- Successful Tests: The ability to identify and trade around precise levels, such as 6065-6070 and DLMB zones, showcased the value of disciplined strategy and analysis.
- Short Squeeze: Recognizing patterns where shorts were vulnerable provided opportunities for profit, especially during the afternoon rally.
- Market Rhythm Awareness: Adherence to the MATD rhythm highlighted the importance of staying attuned to market structure and expectations.
Key Takeaways:
- Precision and discipline in defining and respecting target zones and support levels were instrumental in navigating the day’s bullish momentum.
- Regular updates and interactive discussions (e.g., RTH vs. 24hr DLMB values) fostered a collaborative learning environment, enriching trader insights.

Conclusion:
The session was a robust example of trading in alignment with market structure and dynamics. Bulls maintained control, and the team’s analysis was validated by the market’s adherence to key levels and target zones. The day ended on a high note with opportunities to capitalize on both the squeeze and volatility into the close.

Discovery Trading Group Room Preview – January 29, 2025

Key Events:
- FOMC monetary policy announcement scheduled at 2:00 PM ET, followed by Jerome Powell’s press conference at 2:30 PM ET.
Market Highlights:
- Tech Sector Reversal: The Nasdaq rebounded nearly 2% following Monday’s 3% drop. Nvidia (NVDA) surged 9% amid heavy inflows into leveraged ETFs betting on its recovery.
- The S&P 500 gained 0.9%, while the Dow Jones increased by 0.3%.
Trade and Tariff Developments:
- Markets are monitoring mixed signals from the White House regarding tariffs, with the February 1 deadline approaching. Commerce Secretary nominee Howard Lutnick’s confirmation hearing today could provide clarity.
- General Motors CEO Mary Barra expressed confidence in the administration’s understanding of potential tariff ramifications.
White House Policy Updates:
- A freeze on certain government spending was clarified as targeting programs impacted by recent executive orders.
Corporate Earnings:
- Premarket Reports: Companies like APTV, ASML, ADP, BSX, DHR, GLW, and MSCI.
- Post-Bell Reports: Major names include Meta (META), Microsoft (MSFT), Tesla (TSLA), and IBM.
Economic Calendar:
- Goods Trade Balance and Wholesale Inventories data at 8:30 AM ET.
- Crude Oil Inventories at 10:30 AM ET.
Market Trends:
- Volatility has eased slightly but remains moderately elevated.
- ES futures maintain their position within short- and intermediate-term uptrend channels, with significant technical levels identified for support and resistance.

ES -Week to Week

Bulls aiming for another strong day need to break and hold above 6100. Yesterday’s high at 6105.50 could serve as resistance, but a push beyond it may lead to a quick run toward 6120, with a top range near 6140.50. Meanwhile, bears want to drive the price below 6084. If 6059.50 prints, it could be a solid buy-the-dip opportunity. The day’s lower boundary is around 6023, and we remain bullish unless we drop below 5891.50, at which point the trend shifts back to bearish.

NQ – Week to Week

Bulls have yet to test the 22,080 line, and that may remain elusive now that Nvidia is under pressure. Today’s upper trading range sits at 21,829, with a lower boundary at 21.182. If the NQ can climb above 21,626, it could ride up to 21,776, and beyond that lies a gap targeting 21,829.

On the downside, breaking below 21,506 is bearish, with potential support at 21,424 and yesterday’s open at 21,343.