by Danny Riley

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The Art of Patience: Navigating the ES Dip-and-Rally Pattern

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Our View

Wednesday’s trade was almost exactly like Tuesday’s—weak in the early goings and then the 11:00-11:30 buys started showing up. It was another drop, chop, and rally day. It seems like the sideways-to-down chop is all part of how to lure the retail traders into selling and then set off the buy programs and use the shorts to fuel the rally.

None of the economic negatives seem to matter. I think the main thing about yesterday was the rotation: buy ES, sell NQ, YM, and RTY. You don’t see that often. Trump’s threat to impose 25% tariffs or more on cars, semiconductors, and medicines contributed to early weakness, but ES volume was low. It seems the higher it goes, the lower the volume falls.

In the afternoon, the index markets reversed most of their losses, and the S&P cash made a new all-time high, its third record high in 2025. The January Fed minutes were exactly like I said they would be, a non-event. Despite plenty of Fed speakers this week, there really isn’t much they can say. Any talk of rate cuts this year is a pipe dream. The Fed is in solitary confinement and should be.

The minutes showed concern about stubborn inflation and the potential effect of Trump’s policy proposals, particularly tariffs, on the Fed’s efforts to bring price down to their target. My take? Trump may be adding to inflation fears, but we already knew inflation was going back up in October. The Fed’s December rate cut never should have happened, and the markets made that clear when they dropped 3% immediately after the decision on the hawkish cut.

The Fed’s statement introduced a new qualifier on the “extent and timing” of future rate cuts, suggesting a slower pace in 2025 than previously anticipated. So far, that hasn’t stopped investors’ appetite for the stock market, nor have Trump’s tariffs. According to JP Morgan, the S&P suggests continued economic expansion, with a resilient macroeconomic backdrop despite some weakening in the labor market and bumpy inflation. I guess that’s the world we live in.

I don’t think much has changed. The ES was doing 1.5 million plus contracts a day for weeks, and now that it’s going up, volume has fallen to 1 million a day. I usually take that as a positive, but the PitBull says it can be a precursor to a sell-off. I don’t see that happening right now.

What I do see is that ES and NQ volume is so low that the first part of the day is a dead man’s chop. If you keep your wits about you, recognize the pattern, and stay patient, you’ll find a good level to get long into the chop, define your risk, and let the buy programs do the heavy lifting like they have been doing for the last few weeks.

I’m not ruling out selling into a big gap-up, but again, the trend is higher, so if you go that route, you will need to flip to long at some point. I still believe we are on our way to 6200, but I also understand there could be a drop—nothing goes up forever

Our Lean

We have three economic releases this morning and three Fed speakers.

Our lean is to be patient. If you see the same price action as the last few days, buy the dips—6120-6130 is key.

On the upside, the ES needs to get above 6168, and if that happens, I think the stops will carry it to its 6178.75 high and then up to 6190-6200.

Will that happen today? I’m not sure, but keep an eye on 6168.

MiM and Daily Recap

The S&P 500 E-mini Futures (ES) opened the overnight session at 6143.75 and initially moved higher, reaching 6157.00 before pulling back to a low of 6130.25. The session was marked by choppy action, with buyers and sellers actively testing key levels. The market eventually settled at 6134.25 by the end of the Globex session, down 9.50 points (-0.15%) from the previous session’s close.

From 8:30 a.m. onward, the market exhibited significant two-way action. The initial push higher after the open saw resistance at 6138.75 before sellers forced a retreat to 6131.75 by 8:39 a.m. The regular session began at 6134.25, during which a quick rebound brought prices back up to 6136.50 by 9:36 a.m., but the rally was met with renewed selling pressure. This back-and-forth movement continued, forming lower highs and lower lows until the eventual session low of 6129.25 was established at 10:03 a.m.

The bulls found some footing on the morning low and drove the market 24.5 points higher to 6153.75 at 12:03, marking a two-hour rally. That set up another choppy period, with the market oscillating within a 10-point range until 1:12 p.m., when the bulls rallied from a lower low of 6140.25 up to 6166.50, a change of 26.25 points (0.43%). From there, the market remained range-bound until the cash close at 6163, finishing up 15 points (0.24%) from the prior cash close.

At 3:52 p.m., the Market On Close (MOC) data revealed a small buy imbalance of $380M, which had little effect on the close. The full day’s volume stood at 1,025,886 contracts, indicating steady participation throughout the day.

Overall, the market displayed resilience with strong intraday recoveries after initial pullbacks. Buyers defended key support levels, and despite late-session consolidation, the ES held its gains, signaling a positive bias heading into the next session.

How to read the MiM

Technical Edge

Fair Values for February 20, 2025

S&P: 18.46
NQ: 71.73
Dow: 97.79

Daily Breadth Data 📊

NYSE Breadth: 46% Upside Volume
Nasdaq Breadth: 60% Upside Volume
Total Breadth: 56% Upside Volume
NYSE Advance/Decline: 43% Advance
Nasdaq Advance/Decline: 45% Advance
Total Advance/Decline: 44% Advance
NYSE New Highs/New Lows: 79 / 65
Nasdaq New Highs/New Lows: 167 / 118
NYSE TRIN: 0.80
Nasdaq TRIN: 0.54

Weekly Breadth Data 📈

NYSE Breadth: 56% Upside Volume
Nasdaq Breadth: 64% Upside Volume
Total Breadth: 61% Upside Volume
NYSE Advance/Decline: 58% Advance
Nasdaq Advance/Decline: 58% Advance
Total Advance/Decline: 58% Advance
NYSE New Highs/New Lows: 235 / 161
Nasdaq New Highs/New Lows: 428 / 437
NYSE TRIN: 1.04
Nasdaq TRIN: 0.78

Guest Posts:

Dan @ GTC Traders

Neutrality

Each morning for the GTC Traders Premium Members, we have a ‘Morning Note’ or ‘Daily Note’. Among other things, we run through major worldwide markets such as U.S. Equities, Treasuries, Emerging Markets, Junk Debt, Commodities, the Dollar, and more … and specify our periodicity (0 to 15 days, or ‘present’ to 15 days out) our directional stance on that market.

‘Bullish’. ‘Neutral’. Or ‘Bearish’.

We do not do this to specify trade thoughts on each of these markets. We review our portfolio, adjustments and trades sometime in the last hour of trading.

No, we run through major markets in the ‘Daily Note’ such that we have in our mind some sense of ‘Market Awareness’. Where do major markets stand, and what is the overall landscape of major listed markets around the Globe?

What do we find as of late?

U.S. Equities, say … in the S&P 500 or the Russell? Still neutral. Yes, we pop just a little higher on the Spiders, we may turn over to bullish. But for right now? We’re remaining neutral. We have barely peaked outside of the range we developed since November of 2024.

The 7-10 Year Note? We could view something like that through the iShares ETF … IEF

We’re neutral. Again, this market hasn’t moved around much since November of 2024, and we are nearly at the same yield.

Commodities as a whole; say through something like GSCI or GSG?

Again … we are neutral. We’re within the same range that we established back in January.

What about Junk Debt? Surely with all of the uncertainty in the world, Junk Debt is showing true risk and if we look at something like the ETF JNK, we’ll see some real movement and direction?

Nope. We’re neutral. Again, we remain within the range that we established back in October of 2024.

The Precious Metals are currently an outlier on their bullish trend, but that is simply one market out of many. The U.S. Dollar Index? Again, we’re neutral. 90 Day Short-Term Interest Rates or STIRs in the First Red Term?

Neutral.

We simply say the above to highlight that despite all the controversy, asteroid-slamming news that we are bombarded with on a daily basis?

We simply see non-directional, neutral markets far beyond the S&P 500 Index. Uncertainty. It’s important to have the larger picture in mind when you approach any single market. We currently have two trades on; long in Pepsi (PEP) and Colgate (CL), and we got ourselves stuck in two markets that simply will not move. The only real thing we see that we are able to take advantage of, is more brief trades that fit inside the 15 day periodicity.

Until next time or the market provides some real direction? Stay safe … and trade well.

Trading Room News:

Polaris Trading Group Summary: Wednesday, February 19, 2025

Opening & Initial Market Setup:

David started the session by streaming charts at 8:23 AM and confirmed the session would begin at 9:15 AM.
Early discussion focused on trade craftsmanship and preparation.
First key trade signals emerged just after the open, with:
- Crude Oil (CL) OPR Long trigger
- NQ short setup, fulfilling the 22192 – 22172 target zone
- ES bearish scenario, with an initial target zone of 6135 – 6130, which was quickly met

Morning Session Highlights:

A CCI trade setup was pointed out by DanV at 10:11 AM, earning praise from David and others.
ES was sluggish (“lead sled”), while NQ was strong (“Lambo”), showing better short-side action.
By 10:27 AM, David noted that ES was trapped in a tight range, while NQ shorts performed well.
Shortly after, a short squeeze played out, trapping shorts and reversing upward.

Midday & Market Shift:

Cycle Day 1 Low held perfectly, reinforcing precision in levels.
Market bias shifted bullish on dips, with the 6145 “Line in the Sand” retested.
Bull flag formed, hinting at a higher push.
David took a lunch break around noon, with price holding above VWAP, confirming long-side strength.

Afternoon & FOMC Reaction:

The 2 PM FOMC minutes release revealed no surprises, confirming the Fed’s stance on inflation progress before adjusting rates.
Market responded positively, with ES and NQ breaking prior highs, targeting 6170 – 6175.
ES hit the 6163 D-Level target precisely, showing continued technical accuracy.

Closing Notes:

The 3-day cycle statistic (92% probability) remained intact.
Market-on-close (MOC) orders indicated a $300M buy imbalance.
David classified today as a consolidation cycle, hinting at a potential expansionary move ahead.

Key Takeaways & Lessons:

Precise execution of technical levels, with multiple targets (NQ 22192, ES 6135, and 6163) hit with accuracy.
Patience paid off as ES was slow early but rewarded long trades later.
Trapped shorts provided fuel for the rally, reinforcing the importance of recognizing short squeezes.
FOMC events can act as catalysts, and today’s reaction confirmed the ongoing bullish cycle.

Overall, another solid day of technical execution and disciplined trading.

DTG Room Preview – Thursday, February 20, 2025

S&P 500 Hits Record High

The S&P 500 reached a new all-time high on Wednesday, shaking off concerns over Trump’s latest tariff measures and the January FOMC minutes.
The Nasdaq and Dow both gained 0.1%.
The Fed minutes showed most policymakers favor keeping rates at restrictive levels to curb inflation.
Trade and immigration policies were cited as potential upside risks.

FHA Delinquencies Rise & Workforce Cuts Loom

The FHA loan delinquency rate surged to 11.03%, reflecting stress in lower-income borrowers.
FHA mortgages accounted for 14.5% of the market in 2024.
Bloomberg reports the FHA is set to cut 40% of its workforce, adding to anticipated 50%+ budget cuts at HUD.

Tariffs & Business Struggles

Atlanta Fed’s Raphael Bostic highlighted that businesses are looking to pass tariff costs to consumers.
Prolonged inflation may limit their ability to do so, increasing economic pressure.

Palantir (PLTR) Drops on Defense Budget Cuts

Palantir (PLTR) shares fell over 10% on Wednesday and another 5% after-hours.
Reports suggest Defense Secretary Pete Hegseth plans to cut military spending by 8% per year for the next five years.
Government contracts make up nearly 50% of Palantir’s revenue.

Key Earnings Releases

Before Market Open: Alibaba (BABA), Walmart (WMT), BAX, BLDR, LNG, and more.
After Market Close: AKAM, BKNG, DBX, RIVN, TXRH, and others.

Economic Data & Fed Speakers

8:30 AM ET: Unemployment Claims, Philly Fed Manufacturing Index
10:00 AM ET: CB Leading Index
12:00 PM ET: Crude Oil Inventories
Fed Speakers: Goolsbee (9:35 AM ET), Musalem (12:05 PM ET), Barr (2:30 PM ET)

ES Market Overview

Volatility Steady: The ES continues to trade under its all-time high with a 5-day ADR of 53 points.
Trendline Levels:
- Resistance: 6304/07, 6492/97
- Support: 6115/12, 5949/54, 5861/56, 5680/75
No Whale Bias: Overnight large trader volume was light.

ES -Week to Week

The bull/bear line for today sits at 5,959.75, acting as the key level that separates a bullish bias from a more cautious stance. Holding above this level keeps buyers in control, while a decisive move below would shift momentum to the downside. That line do move higher by about 30 points yesterday so we are beginning to squeeze the bulls.

Currently, price is near 6,146.50, trading just under resistance zones. Our intraday bull/bear line is 6157 if we can get across that 6165 is in play. The upper range target for today is 6188 and then 6218.

If price starts retreating, watch for initial support at 6,125.50 which is our range low for the day. Below that would be 6095.

Today’s session hinges on the battle around the 6,146–6,157 range. A break higher favors buyers targeting 6,165–6,180, while failure to hold strength opens the door for a pullback into support levels. Keep an eye on volume and momentum shifts near key levels.

NQ – Week to Week

The intraday bull/bear line for NQ today is at 22,233.85. This is the level that must hold for sustained bullish action throughout the day. If price remains below, we could see a shift to a more bearish tone.

NQ has been on an impressive rally, but we are seeing some hesitation around the 22,200-22,300 zone, which has multiple levels of resistance, including 22,300 and 22,395, which is today’s range high target. If the market can clear this area, the next upside target is 22,548.

On the downside, immediate support comes in at 22,071, which is the range low target today. If this breaks, a move lower toward 21,919.5 is possible. Below that, the key support area is 21,810.75, and a further breakdown could lead to 21,605.25.

Given the recent rally, bulls need to hold above 22,233.85 for continuation, while bears will aim to push below 22,118 for a move lower. Watch for reactions around these levels for the day’s trend.

We remain in a bullish long-term trend, but it is going to need some enthusiasm to convince us we are going much higher. The long-term bull/bear line sits at 21,300.