by Danny Riley

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Stock Market’s Tug-of-War: Bulls Charge Despite CPI Concerns

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Our View

They always pack a lot into shortened holiday weeks, and based on how things went last week, the week ahead should be a doozy. After a week of drops and pops, the ES ended up 1% on the week and 3% YTD, ran the stops I talked about, and closed out the week with a $1.7 billion buy imbalance, finishing on the highs of the day—despite a hot CPI number and uncertainty over Trump’s tariffs and whether they will push prices higher.

So far, the old saying “As January goes, so goes the year” is holding up, but we’re only a month and a half into 2025. Even though I’m a die-hard bull, I have my doubts.

What I do know is that inflation is rising, and interest rates are not coming down. In fact, I’m more concerned about something no one wants to talk about—rate hikes. If inflation keeps rising, it becomes more of a possibility. In fact, several economists are now saying there’s a 25% chance of a rate hike. Clearly, companies in the S&P are concerned about tariffs. According to LSEG data, since the beginning of the year, nearly 430 companies in the S&P 500 have either mentioned tariffs or responded to a question about tariffs on earnings calls or at investor events.

With nearly three-fourths of the index companies having reported, S&P 500 earnings are on track to have climbed 15.2% from the year-earlier period, its strongest pace in three years. It’s hard to deny that the markets have been going up, and my number one rule is: the trend is your friend.

All eyes will be on Walmart’s earnings this week, and next week, Home Depot and Target report, which should give us a clearer picture of consumer spending. There are also 8 economic reports and the January Fed minutes on Wednesday.

It’s Sunday night and the ES and NQ are trading higher, which isn’t surprising given the markets being closed for Presidents’ Day and the lower volumes.

Our Lean

As I write this, the ES is trading at 6139.50 with a high of 6139.75. The March active all-time high stands at 6178.75. There’s a good chance the ES makes a run for that high, but my concern is that everyone is long, especially with Trump introducing new tariffs. Sometimes, pushing through new contract highs can be tricky.

Our Lean: For a scalp, I can’t rule out selling a 15- to 20-point higher gap-up. However, if the trend is your friend, you are supposed to buy the pullbacks.

MiM and Daily Recap

Data is from Monday’s holiday trading.

At 8:27 AM on Friday, the premarket Globex session reached a low of 6121.25, marking the lowest point before the cash session began. From there, buyers stepped in aggressively, driving prices higher in a strong pre-market rally that carried into the open. By the time the market opened at 6134.50, the momentum remained bullish, pushing price action even higher. The rally continued through the opening minutes, reaching a morning high of 6145.25, reflecting a 24-point gain from the Globex low, or approximately 0.4%.

However, the bullish strength faded, and selling pressure emerged. Over the next six minutes, steady selling took hold, driving the market down 13 points to 6132.25. This marked the first notable pullback of the session. Bulls attempted to reclaim control, making another push higher, but the rally lost steam, and by 11:09 AM, the market put in a lower high. This was followed by another wave of selling pressure that persisted for ten minutes, sending the market down to 6129 by 11:18 AM, a total drop of 14.75 points from the lower high.

The bulls staged a weak recovery attempt, managing to push prices up 9.25 points before sellers took over again at 11:27 AM. The renewed selling pressure drove the market lower, printing a fresh intraday low at 6135.75, down 12.50 points from the previous rally attempt. This level ultimately held as the low of the day.

From there, buyers stepped in once more, leading to a 17.25-point rally that lifted the market back up to 6143. However, the market failed to sustain further upside momentum and transitioned into a period of sideways chop for the remainder of the afternoon. Trading remained contained within a narrow range between 6138 and 6130, with neither bulls nor bears able to assert dominance.

The market ultimately settled at 6131.75, closing nearly flat with just a 0.75-point loss compared to Thursday’s close. While the session featured strong rallies and sharp sell-offs, the afternoon saw a lack of directional conviction, leading to a range-bound finish.

The MIM was MIA on Friday as NYSE data escaped our collectors. That has been fixed for today.

How to read the MIM

Technical Edge

MrTopStep Levels:

How to read MTS Levels

Fair Values for February 18, 2025:

SP: 19.28
NQ: 73.94
Dow: 106.49

Daily Market Recap 📊

NYSE Breadth: 62% Upside Volume
Nasdaq Breadth: 74% Upside Volume
Total Breadth: 72% Upside Volume
NYSE Advance/Decline: 61% Advance
Nasdaq Advance/Decline: 56% Advance
Total Advance/Decline: 58% Advance
NYSE New Highs/New Lows: 78 / 62
Nasdaq New Highs/New Lows: 167 / 187
NYSE TRIN: 0.82
Nasdaq TRIN: 0.44

Weekly Market 📈

NYSE Breadth: 48% Upside Volume
Nasdaq Breadth: 57% Upside Volume
Total Breadth: 54% Upside Volume
NYSE Advance/Decline: 51% Advance
Nasdaq Advance/Decline: 48% Advance
Total Advance/Decline: 49% Advance
NYSE New Highs/New Lows: 204 / 166
Nasdaq New Highs/New Lows: 344 / 394
NYSE TRIN: 1.06
Nasdaq TRIN: 0.76

Trading Room Summaries

Discovery Trading Group Room Preview – Tuesday, February 18, 2025

Stocks Near All-Time Highs
- U.S. stock indexes continue their strong momentum.
- Rally is broadening beyond just the “Magnificent 7.”
AI & Tech Driving Gains
- Nasdaq gained 2.5% last week, S&P 500 1.5%, Dow Jones 0.5%.
- AI stocks remain strong: Palantir (PLTR) up 55%, Super Micro Computer (SMCI) up 50% year-to-date.
Key Economic Data & Fed Watch
- A relatively quiet week, with Fed’s January meeting minutes on Wednesday as the main event.
- CPI and PPI were hotter than expected, but core PCE for January is projected at 2.6%, down from 2.8% in December.
Corporate Earnings Focus
- 46 S&P 500 companies reporting this week, including Alibaba (BABA) and Walmart (WMT).
- Premarket earnings: ALLE, BCS, EXE, MDT, PANW, and others.
- Post-market earnings: ANET, CDNS, DVN, OXY, and more.
Strong U.S. Dollar Impact
- The dollar is strengthening due to a Republican election sweep, protectionist policies, and fewer expected Fed rate cuts.
- Large international companies, including Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), and Tesla (TSLA), are feeling the pressure.
Market Activity & Volatility
- Volatility dropped sharply on Friday with lighter trading volume, possibly due to Valentine’s Day.
- S&P 500 remains just below its all-time high.
- ES futures have cleared their short-term downtrend, signaling a bullish setup.
Fed Speakers Today
- No major economic data due to the federal holiday.
- FOMC speakers: Harker (9:30 AM ET) and Bowman (10:20 AM ET).

Markets remain in an uptrend—Fed minutes on Wednesday and earnings this week will be key drivers.

ES -Week to Week

The intraday bull/bear line for today is at 6132, marking the key level that separates bullish and bearish intraday sentiment. Holding above this level favors the bulls, while sustained trading below it could shift momentum to the downside.

If the market maintains strength above 6132, the first upside targets are 6146 which is the previous day’s high and 6171.50 which is the target range high for the day. With a more extended move, potentially reaching 6208 marking a significant resistance area.

On the downside, failure to stay above 6132 increases the likelihood of testing support at 6121 and then 6106. Below that is 6094 which is the range low target for the day. If that breaks it is a bad day for the bulls and target lows at 6076 and 6057 come into play.

The broader bullish structure remains intact, with only a move below 5954 changing the long-term outlook. Traders should watch price action around the key levels to determine directional bias for the session.

NQ – Week to Week

The intraday bull/bear line for NQ is now at 22,171.25, marking the critical level where momentum transitions between bearish and bullish sentiment. While trading above this level strengthens the bullish outlook, a drop below could invite sellers to retake control. NQ is in a longer-term bullish phase and that would not change today unless we print below 21,241.

If buyers maintain control above 22,171.2, they will aim for 22,225, with a range high target at 22,359.50. These levels represent significant resistance, where sellers could step in if momentum stalls.

On the downside, failing to hold 22,171.25 puts the market at risk of testing the 21,983 range low target, which serves as an initial support level. A deeper selloff could target 21,805.75 and then 21,7709.

With price currently trading near an upper resistance zone, today’s key battle will be around 22,211.75. Holding above this strengthens the case for further upside, while a rejection below could bring increased selling pressure. Traders should watch these levels closely as the session unfolds, with volatility likely to play a significant role.