by Danny Riley

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The Dollar’s Reign: Resilient Today, But For How Long?

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Our View

Everyone loves the Trump Bump but that’s not the only reason the stock market is going up. The US dollar has skyrocketed and foreign countries are buying the dollar and some of that is ending up going into the stock market. And sure, if you live in Europe, vacationing in the US is cheap, but we all know the dollar can’t keep going up forever.

In fact, they say when you see a big shift like this it sometimes marks a high. I did tons of FX for Sheikh Mohammed bin Rashid Al Maktoum’s Dubai Holdings at my currency operation on the CME floor where we’d roll his currency option positions when they let them expire, but this is different. While the dollar is still top dog there is a lot of competition that didn’t exist 20 years ago.

As I have always said, I am not an economist, but with the US debt clock nearing $37 trillion, one has to wonder if we have already gone beyond the point of no return. So I searched for stories on the dollar and came across this story from the World Economic Forum which I think is very informative:

(Here’s the link for those who prefer it)

Why the US dollar will be indispensable as the world’s reserve currency – until it’s not

Jan 23, 2025

The US dollar is at a near-record high, but its future role as the world’s reserve currency continues to be questioned due to financial fragmentation and global debt concerns.
US borrowing trends, challenges from other currencies – traditional and digital – and the burden of US dollar debt on developing countries all raise questions about ongoing dollar dominance.
An expert panel at the World Economic Forum’s Annual Meeting 2025 in Davos expects US dollar primacy to continue for the foreseeable future, but gradual diversification could necessitate greater global collaboration in the years ahead.

I would read the links within the story. I have no idea when the dollar will fall, but that is what I suggested over a year ago by adding some crypto exposure to your portfolio — and if you did you have already seen a jump in those positions and I don’t think it’s going to stop and nor is Musk and Trump going to stop pushing that theme. Like I said I am not an economist, but my street smarts tell me there will be a time when you will look back and say, I should have added some exposure, if not already.

Our Lean

The big buy imbalance on the NYSE 3:50 imbalance pushed the futures up going into the 4:00 close and after. I think it really surprised people but so did last night’s gap down on Globex after a headline hit saying S&P 500 FUTURES SINK 1% AS DEEPSEEK SPARKS WORRY OVER US TECH. Now those losses have accelerated dramatically this morning.

According to the Stock Trader’s Almanac, February is the weak link in the best six months for stocks and the PitBull said he has seen weakness in the last two weeks of January. My lean was that the markets had rallied enough without any major pullback to sell the rallies, but the ES made a low at 6072.00, down almost 50 points. That leaves the question, do the futures bounce? Probably but my trade was to be a seller today and I always have a hard time selling down 50 points.

MiM and Daily Recap

The ES traded mostly sideways during the overnight session, hitting an overnight high of 6156 and a low of 6139. It opened the regular session at 6152, and barely traded lower before rallying to a new high at 6162.25 by 9:42 AM. This marked the session high, but it was rejected as the market pulled back to and through the open, printing a morning low of 6144.50 at 10:38 AM.

After it failed to make a new low, about 20 minutes, the ES rallied back to print 6157.50 at 11:50 AM. This level was rejected hard as the sellers pounded the market right back down below the open. One last effort to rally made a lower high of 6154.50 at 12:22 PM where the afternoon selling began, with traders taking profits after four days of upside momentum and ahead of the weekend.

By 1:10 PM, the ES had taken out the overnight low and printed a new session low at 6134.75. A brief pullback brought the index to 6141.75 just before 1:30 PM, but the sell programs continued, driving the ES down to 6123.25 by 2:10 PM. The market paused there and tried to rally again before the last hour of the regular session. This rally failed at 6133.25 around 2:53 PM and we got a last push to the downside and printed our low of the day at 6122 at about 3:42 PM.

As the session approached the close, the ES moved back to the 6125 level as the 3:50 MiM release came in at 2.3 billion to buy triggering some short covering. The imbalance gradually decreased and was absorbed into the close with the move higher ending at 6135 and printing the cash close settlement at 6131.75. A bit more selling but then a sideways and upward drift post-market brought the exchange close to 6132, down 16.50 points (0.26%) on the day. The NQ settled at 21,907.75, down 114 points (-0.51%). Volume was light, with the ES trading 1.18 million contracts and the NQ trading 519 thousand contracts.

How to read the MIM

Technical Edge

Fair Values for January 27, 2025:

SP: 78.28
NQ: 308.13
Dow: 529.88

Daily Breadth Data 📊

NYSE Breadth: 66% Upside Volume
Nasdaq Breadth: 58% Upside Volume
Total Breadth: 59% Upside Volume
NYSE Advance/Decline: 57% Advance
Nasdaq Advance/Decline: 58% Advance
Total Advance/Decline: 57% Advance
NYSE New Highs/New Lows: 99 / 27
Nasdaq New Highs/New Lows: 139 / 122
NYSE TRIN: 0.61
Nasdaq TRIN: 0.98

Weekly Breadth Data 📈

NYSE Breadth: 65% Upside Volume
Nasdaq Breadth: 60% Upside Volume
Total Breadth: 61% Upside Volume
NYSE Advance/Decline: 83% Advance
Nasdaq Advance/Decline: 66% Advance
Total Advance/Decline: 75% Advance
NYSE New Highs/New Lows: 138 / 285
Nasdaq New Highs/New Lows: 218 / 483
NYSE TRIN: 0.66
Nasdaq TRIN: 0.87

MTS Levels:

How to read/use the MrTopStep Levels

Room Summaries:

Polaris Trading Group Summary Friday, January 24, 2024

Morning Session:

The session began with typical administrative posts by PTGDavid, including useful links for trading resources and disclaimers.
Early trades:
- A Crude Oil (@CL) OPR Long and Nasdaq (@NQ) OPR Short were initiated but both were stopped out shortly after, leading to light humor from PTGDavid (“So Rude!”).
- Key Levels Identified:
  - The Bull/Bear Line in the Sand (LIS) was set at 6150, and an early bull target of 6161 was fulfilled, showcasing accurate pre-market planning.
PTGDavid temporarily stepped out for a meeting mid-morning.

Midday Highlights:

Upon returning, David highlighted promising setups in @NQ PKB Short and @ES PKB Short, noting a shift below the open range as signaling bearish bias.
The D-LEVEL reversal was emphasized, aligning with structured trading principles, and David provided both educational context and visual examples for participants.
Bulls maintained control before lunch, but market rhythms were consolidative, signaling lower trade edge.

Afternoon Session:

Price action became more dynamic, validating David’s pre-market Bear Scenario:
- Sustained offers below 6150 led to fulfilled targets of 6135 and 6130, providing high-quality trade opportunities for participants.
Educational moments were woven in, emphasizing the importance of respecting swing directions and staying aligned with the dominant force—a key PTG directive.
David noted the transition into Cycle Day 3, marking the 3-Day Cycle target of 6150 as achieved, while cautioning traders about potential reversals.
Bears dominated the final stretch, driving price action into the close, despite a MOC Buy Imbalance of $2.0 Billion.

Key Takeaways:

Pre-Market Preparation: The detailed briefing and Bull/Bear scenarios were highly effective, with targets achieved on both sides.
Risk Management: Early losses were mitigated, showcasing disciplined exits.
Trading Lessons:
- Align with dominant market forces for consistent results.
- Be prepared for both continuation and reversal scenarios, especially in key cycles.

Overall Performance:

The day showcased a well-structured trading plan and execution, with participants benefitting from actionable insights and a clear emphasis on market dynamics. The bearish narrative in the afternoon provided profitable opportunities for those aligned with the scenario.

DTG Room Preview – Monday, January 27, 2025

Highlights from Last Week:
- The S&P 500 had its best opening week since 1985, driven by optimism over President Trump’s announcements, including a significant AI investment.
- Over the weekend, geopolitical tensions arose as Trump threatened, then withdrew, a 25% tariff on Colombian imports after reaching terms with Colombian President Gustavo Petro.
Key Events This Week:
- Earnings Reports: 100 S&P 500 companies report this week, including major players like Meta (META), Microsoft (MSFT), Apple (AAPL), Tesla (TSLA), Starbucks (SBUX), Exxon (XOM), and Chevron (CVX).
- Fed Announcement: The Fed’s first monetary policy update of 2025 is on Wednesday. Rates are expected to remain steady, with markets focusing on future rate cut language.
- Economic Data: Q4 GDP and core PCE readings are anticipated.
Overnight Developments:
- A selloff in tech stocks followed claims by China’s DeepSeek that its AI technology outperforms ChatGPT at a lower cost. Nvidia (NVDA) fell 11%, with ASML, ARM, Broadcom (AVGO), and Micron Technology (MU) experiencing similar declines. Meta (META) and Microsoft (MSFT) dropped about 6%.
- Earnings from AT&T, ELS, and SOFI were reported premarket, with others like Super Micro Computer (SMCI) reporting after the close.
Market Dynamics:
- The S&P 500’s volatility increased after an overnight tech selloff erased gains from last week.
- Futures dropped sharply, breaching the 50-day moving average. Bears have short-term momentum, but overselling may prompt a bullish bounce.
- Key support levels: 5985/82s, 5850/55s, 5758/53s. Key resistance levels: 6375/80s.
Other Notes:
- The economic calendar is light today, with New Home Sales data due at 10:00 AM ET.
- Short bias is observed among larger traders, with lower-than-expected overnight volume amplifying bearish sentiment.
Stay tuned for updates on earnings and key market developments throughout the week.

ES Week vs. Week

ES is gapping down this am. Just a reminder, the line to move from bull mode to bear mode sits at 5863 and we are a bit higher than that. NQ is taking the brunt of the selloff as of 8 am this morning.

The line to watch for further downside is 5978. If we start printing below that, the bears might have further damage. For a bounce, watch the 6057 level, if we get above that we might see 6048. The gap is large but it is not out of line, we are trading in line with prices from Jan 17 but selling does beget selling.

NQ Week vs. Week

The switch to bull mode for the NQ sits at 22,080 and has not been hit so technically we are in a bear mode that was established on 12/18/2024.

For today,, bulls want to recover 21,165.50 to mitigate the damage. Continued selling below there would be bearish. Stop areas to the downside are 21,080 and then 20,729.

If the bulls do push back, watch for a run to 21,431 and then 21,548.