Five Reasons the ES and NQ Sold Off

The ES rallied up to 6518.00 on Globex, trading 6499.00 on the 9:30 regular session open. It traded up to 6602.75 and then sold off 43 points down to 6460.25 at 10:15. It rallied to 6475.50 at 10:35, sold off down to the low of the day at 6555.50, rallied up to 6472.00 at 11:06, and then traded in the 6458.50 to 6474.50 range for the next 4 hours.

The ES rallied up to 6476.00, traded 6479.25, fell a few points before the 3:50 imbalance showed $1.5 billion to sell, traded 6462.25 at 3:55, then rallied up to 6479.25 and traded 6475.25 on the 4:00 cash close. It traded 6472.75 on the 5:00 futures close, down 44.75 points or -0.69% on the day. The NQ settled at 23,461.75, down 307.25 points or -1.29%.

In the end, the ES and NQ were weighed down by weakness in technology stocks and economic reports. In terms of overall tone, it was all about the failed rallies. Volume was higher, with 1.275 million contracts traded.

On Sunday night, the ES opened at 6478.75, up 3.75 points, made a low at 6459.50, and settled at 6479.75, up 7 points or +0.11% on volume of 118k lots.

This week includes 15 economic reports, four Fed speakers, and the Senate Banking nomination hearing for Stephen Miran to be Fed Governor. The 2Q 2025 earnings season is 98% complete.

FACTSET: Earnings Insight

Dollar Demise

The most important currency in the world is under attack—the US dollar. I don’t think Trump helped its cause when he placed a 50% tariff on India. The U.S. and India have had an evolving, often strained relationship since India’s independence in 1947, following the end of British rule. Relations have moved from periods of estrangement during the Cold War to a strong strategic partnership in the 21st century, especially after India was named a major defense partner in 2016 and a civilian nuclear deal in 2008.

Additionally, India has been a major holdout in the expansion of BRICS, the new currency bloc designed to counter the U.S. dollar. Original BRICS members were Brazil, Russia, India, China, and South Africa. Nine additional countries were recently announced as partners: Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Thailand, Uganda, Uzbekistan, and Nigeria.

While China and Russia continue to push the initiative, India has advocated a more cautious and structured approach, primarily due to strategic competition with China. While India ultimately supported the expansion, it did so with specific motivations and concerns, including ongoing border disputes, strong opposition to the Belt and Road Initiative (BRI), and resistance to turning BRICS into an explicitly anti-Western currency.

Over the weekend, Chinese President Xi Jinping reiterated his vision for a new global economic and security order that prioritizes the “Global South.” In a direct challenge to the United States during a summit that included Russia and India, Xi said:

This was a thinly veiled swipe at the United States and Trump’s tariff policies. Xi also called for the creation of a new SCO development bank, which would mark a major step in the bloc’s long-held aspiration of developing an alternative payment system to circumvent the U.S. dollar and its global sanction power.

At a point when US and India relations were at their highest levels, Trump decided to pull India into the fray, pushing them back toward Russia and China. The jury is still out on BRICS, but clearly, U.S. policy may have moved the bar higher.

Our View

The ES has rallied 30.48% from its April 7 low and is now up over 10% on the year. It got through August with flying colors, but September has historically been the worst-performing month for the S&P 500, with an average decline of about 1.2% since 1928 and negative returns in 56% of those years.

The worst September was during the 2008 credit crisis, when Lehman Brothers collapsed—ES dropped 9.3% for the month. Their desk was right above mine on the floor. In 2024, the ES snapped a three-week winning streak and dropped a record 4.25% in the first week, marking its worst September start since 1953. Over the last 5 years, it has averaged a -4.2% return; over the last 10 years, -2%, and over 25 years, -1.5%. No matter how you do the math, September is a tough month.

September and October were always rough, and I expect we’ll see this part of this possibly starting this week with today’s ISM and S&P PMI, Thursday’s CPI, and Friday’s jobs number.

Our Lean

Despite the constant news flow, the ES is only 20 points away from 6600 and 43 points off its all-time high at 6523, which is the key to the next move up. While price action has been weak, the Stock Trader’s Almanac shows the day after Labor Day is historically mixed:

To summarize, we could see more sideways chop until after the middle of the month.

Our lean: As we roll into an unseasonably soft September off the heel of the BRICS meeting, the court ruling that says most of Trump’s global tariffs are illegal, the CAC and FTSE are weak, and the DAX is down 1.5%, with NVDA also down 1.5%. I think we could be in for some weakness.

6418 is critical, and 6408 is the level to watch — that’s the 38.2% Fibonacci retracement from the August 1 low. Below that, 6390–6388 and 6365.00 are key support levels.

I’ll be looking to buy the early weakness using stops and to sell any 30 to 50-point rallies.

ES – Levels

The bull/bear line for the ES is at 6478.25. This is the key pivot level that must be regained for bullish sentiment to re-establish. Staying below this level keeps the pressure to the downside.

Currently, ES is trading at 6423.75, showing weakness below the bull/bear line. If selling continues, the first goal for the bulls is to recover our downside target of 6441.50. If that fails, then the next target below is 6406.50. A break below 6406.50 could extend losses further and put the 6370.00 region in play.

On the upside, resistance above the lower range target comes in at 6455.50, then stronger resistance at 6472.75 just beneath the bull/bear line. If ES can reclaim and hold above 6478.25, the next objective would be 6515.25, our upper range target. A sustained push above that level could reopen the path towards 6540.00.

NQ – Levels

The bull/bear line for the ES is at 23,509. This level is the key pivot that determines sentiment. Remaining below this level keeps the market under pressure, while reclaiming it could shift momentum back to the upside.

Currently, ES is trading around 23,234.75, which is well below the bull/bear line and signals bearish conditions in the early session. The lower range target is 23,309.25, which has already been breached. If weakness continues, the next downside objective sits at 23,121.25. A break below there could open the door toward the 23,000 round number zone.

On the upside, initial resistance comes at 23,397.50, then 23,461.75, with stronger resistance at the bull/bear line of 23,509. Above this, further resistance is seen at 23,708.75, the upper range target, and then at 23,762.

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