by Danny Riley

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Trade Wars & Tweet Storms: Markets Shrug and Carry On

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Our View

As Trump runs down his list of things to do, the call with Xi didn’t happen on Tuesday, but today could be the day. After Friday and Sunday night’s tariff “smash down,” the ES and NQ have been recovering, but yesterday’s rotation was into the Russell 2000 (RTYH25), which closed 34.40 points higher, up 1.52%.

The index markets scratched their way back from most of Monday’s losses despite the ongoing trade war between the U.S. and China. While Mexico and Canada struck a deal, China hit back with tariffs on some American goods, restrictions on Chinese mineral exports, and an antitrust probe into Google. That didn’t seem to faze the index markets, as all four major indices closed higher. Trump responded to China by calling tariffs “an opening salvo” and indicated that the U.S. would levy substantial tariffs against China if the countries can’t come to an agreement.

The VIX took things in stride, settling around its yearly average of 17, while the yield on the 10-year note fell to 4.511%, down from 4.542% on Monday. Oil recovered some of its earlier losses but still closed down 0.60% at $72.70 a barrel. Bitcoin dropped 17.46 points, closing at 97,914.84, while gold continued its rally, up nearly 8.5% this year. It settled just under $2,900 an ounce, after surging 24% in 2024. Recently, JPMorgan Chase moved to deliver about $4 billion worth of gold futures in “an apparent hedge against potential trade disruptions.”

Everything is moving…

Our Lean

This morning, we have four economic reports, including the ADP report, along with five Fed speakers. According to FactSet, companies in the S&P 500 have reported 16.3% growth in fourth-quarter earnings so far this season.

I still think we’ll see higher prices, but this remains a high-risk environment. There are still a boatload of questions about AI and all the billions being poured into it. If China can pull out DeepSeek, who’s to say they don’t have more surprises? Another wildcard is the unpredictability of President Trump, there are more headlines coming, many more.

Our lean: I think if we open lower again, you have to be a buyer but beware of the Trump/Xi headlines. I don’t think China is going to back down like Panama, Canada, and Mexico.

The 6070 area looks like resistance, and if the ES can get through there it could be back to the 6111 area, then 6120. On the downside, watch 6030-6020, 6012-6010, and 5995.

This could get tricky today, pay attention to the headlines.

MiM and Daily Recap

The S&P 500 futures opened the regular session near 6026.25 after a weaker overnight stretch that saw prices slide from 6069 down to 5987 at their lowest point. Early on, the market oscillated in a tight band between 6031.25 (7:57 a.m.) and 6019.00 (8:57 a.m.), showing modest back-and-forth probing as traders assessed direction. By midmorning, however, the tone shifted. After briefly dipping to 6018.00 around 9:30 a.m., buyers stepped in aggressively and drove the futures to 6058.25 by 10:39 a.m.

A short pullback followed, finding support at 6047.00 before another leg higher pushed the contract to a new peak of 6066.75 just before noon. That turned out to be the high for the first half, and from there a wave of midday selling knocked the market down to 6039.25 around 12:30 p.m. Despite that pullback, the market maintained an overall upward bias through the early afternoon, bouncing to 6058.00 (1:24 p.m.) and eventually printing the session’s high of 6068.75 at 2:36 p.m.

With less than an hour to go in regular trade, the market climbed once more to 6067.75, but it couldn’t sustain that level and slid off into the close. By 4:00 p.m., the futures settled around 6055.50 in regular trading, up almost 0.50% from the regular-session open. A late dip near 6:00 p.m. took prices back to 6038.25 before the final settlement (or “cleanup”) printed 6045.75. Notably, the full day closed 0.48% above the prior session’s settlement, even though prices gave back some of the morning’s gains by day’s end. Volume for the full session came in around 1.27 million contracts, reflecting steady participation throughout the day. Overall, it was a choppy session with multiple intraday reversals, but a net positive finish compared to the previous close.

From the outset, the market displayed a cautious but resilient tone. Each dip early on found buyers willing to step in, especially during the morning rebound that fueled a run from around 6018.00 to the mid-6060s. Though midday selling briefly challenged the bulls, the willingness to defend support near 6040–6050 underscored a “buy-the-dips” bias. Even with late-afternoon profit-taking, traders kept the market well above the prior day’s low, hinting that sentiment remains constructive.

Regarding the Market on Close (MiM) data, the imbalance meter showed a total of -106 million dollars and about -51% on the sell side, suggesting a moderate downside bias into the close. While not a heavy skew (it typically takes beyond -66% to be considered strongly negative), it was enough to stall the last push higher. Nevertheless, the overall session still finished higher compared to the prior day’s close, implying that the stronger tone from the morning and midday rallies outweighed the late-session selling pressure.

How to read the MIM

Technical Edge

MrTopStep Levels:

How to read MTS Levels

Fair Values for February 5, 2025:

SP: 25.46
NQ: 102.96
Dow: 134.25

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

Guest Posts — Polaris Trading Group

Prior Session was Cycle Day 1: This session was a normal Cycle Day 1 as decline established a new cycle low at 5987 during GLOBEX, at which time the rally began. RTH session opened with a continuation of the overnight rally, fulfilling 6060 – 6065 3 Day Central Pivot Zone. Range for this session was 82 handles on 1.273M contracts exchanged.

For a more detailed recap of the trading session, click on this link: Trading Room RECAP 2.4.25

…Transition from Cycle Day 1 to Cycle Day 2

Transition into Cycle Day 2: Having fulfilled initial upside objectives rallying off the deep “tariff-lows”, expectation for CD2 will be for a normal rhythmic Market/Morning After Trend Day (MATD).

Odds of Rally > 10 = 89% Odds of Rally > 20 = 63%

Corporate earnings will now be the core focus of portfolio managers, analysts and traders, with the occasional Trump Tape Bomb (TTB) that will continue to add “spice” to the trading rhythms.

Of course, nothing changes for PTG…Simply follow your plan. Take only Triple A setups and manage the $risk. ALWAYS HAVE HARD STOP-LOSSES in-place on the exchange.

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 6045+-, initially targets 6065 – 6070 zone.

Bear Scenario: Price sustains an offer below 6045+-, initially targets 6020 – 6015 zone.

PVA High Edge = 6067 PVA Low Edge = 6043 Prior POC = 6045

ES (Profile)

Thanks for reading, PTGDavid

Trading Room Summaries

Polaris Trading Group Summary – Tuesday, February 4, 2025

Morning Session: Cautious Start, Early Bearish Pressure

The session opened with an OPR short trigger in crude oil (CL), which was quickly stopped out.
Meanwhile, an NQ OPR long trade was initiated, and early market activity showed MATD rhythms developing.
The market leaned long on dips, and both NQ and ES OPR trades scaled successfully, with NQ hitting all targets by 10:01 AM.
However, market dips for new entries were absent, making re-engagement challenging.
Market activity was choppy and uncooperative, leading to two-way traffic around the Gamma Guys Volatility Trigger levels.

Midday: Strength in Bulls, Fulfilled Targets

The morning rally perfectly aligned with the lower target zone (6025-20), confirming a strong buy response at prior session HVN levels.
Both NQ and ES reached their OPR long targets, with ES fulfilling all objectives.
Market consolidation and two-way traffic dominated mid-morning, with no major catalysts shaking up price action.
David humorously noted “No Trump Tape Bombs (TBB) today… kinda boring!”

Afternoon Session: Bullish Lean, Steady Momentum

After lunch, bulls continued to hold their bid, leading to a long bias for the remainder of the session.
The market remained steady, without major volatility shocks, ahead of the MOC.
MOC was initially flat, but later posted a Buy imbalance of 731M, giving the market a slight push into the close.

Post-Close Insights & Market Cycle Review

NQ completed a full Cycle Day 1, bottoming overnight before rallying with precision to hit the 21690.50 cycle target.
Transition to Cycle Day 2 suggests a high probability (91%) of further rallying beyond 20 handles.
Key levels for CD2:
- Bull Scenario: Holding above 21550, targeting 21655-21695.
- Bear Scenario: Below 21550, targeting 21465-21435.
With corporate earnings now the main focus, David emphasized sticking to Triple A setups and strict risk management.

Key Lessons & Takeaways:

✅ Precision Trading: The NQ rally hit cycle targets exactly, reinforcing the power of market structure and cycle analysis.
✅ Patience & Adaptability: Market did not provide easy re-entry points after early long trades—sometimes the best trade is no trade.
✅ Risk Management: Stopped-out CL short showed why hard stop-losses are essential.
✅ Earnings Season Impact: Corporate earnings and macro events will continue to shape market dynamics in the coming sessions.

Final Thoughts:

A solid trading day, with well-executed long trades hitting their marks. The afternoon consolidation allowed for positioning into the next cycle day, with bullish odds favoring further upside. Exciting days ahead as the market digests earnings and macroeconomic developments. 🚀

Discovery Trading Group Room Preview – Wednesday, February 5, 2025

Market Recap:
Stocks climbed higher on Tuesday, led by Big Tech. The Nasdaq gained 1.4%, the S&P 500 rose 0.7%, and the Dow Jones added 0.3%. China’s measured response to Trump’s 10% tariff escalation is seen as a sign of potential compromise, similar to prior trade delays with Mexico and Canada.

Key Developments:
- USPS Suspends Inbound Packages from China & Hong Kong: This move disrupts shipments from Amazon, AliExpress, Temu, and Shein, reflecting challenges in enforcing the new tariffs, which remove duty-free treatment for small packages under $800.
- Alibaba (BABA) & JD.com (JD) Falling in Hong Kong: A potential Trump-Xi phone call today could shift sentiment.
- Alphabet (GOOGL) Down 7%: Weak cloud revenue and high spending weighed on earnings, dragging Nasdaq futures lower.
- AMD Swings Wildly After Earnings: Initially jumped but turned down 9% after a weak AI data center growth forecast, raising concerns about competition with Nvidia (NVDA).
Earnings Watch:
- Premarket: Alibaba (BABA), Disney (DIS), Uber (UBER), and other key names.
- After Hours: Arm (ARM), Ford (F), Qualcomm (QCOM), and more.
Economic Calendar:
- Key Reports: ADP Payrolls (8:15 AM ET), Trade Balance (8:30 AM ET), ISM Services PMI (10:00 AM ET).
- Fed Speakers: Barkin (7:30 & 9:00 AM ET), Goolsbee (2:30 PM ET), Bowman (3:00 PM ET).
Market Sentiment & Technicals:
- Volatility Steady: ES 5-day average range: 86.50 points.
- Whale Bias: Bearish into ADP report on light overnight trading.
- ES Trendlines: A short-term downtrend within two longer-term uptrend channels. Key levels:
  - Resistance: 6132/29, 6251/56, 6446/51
  - Support: 5909/12, 5715/10
Bottom Line: Markets remain volatile as trade tensions, earnings, and economic data shape sentiment. Watch for reactions to the ADP report and Fed speakers, with a focus on Big Tech and tariff-related stocks.

ES -Week to Week

The bull/bear line for today’s session is at 6049, marking the key pivot point for bullish or bearish momentum intraday. If price sustains above this level, we could see a move toward the mid-range resistance areas near 6066 (moving average) and 6069 (previous high). A stronger push higher could target the prior resistance cluster at 6110-6112, with the upper bands near 6159-6167 as the next key objectives.

On the downside, failure to hold above 6049 opens the door for weakness, with support levels at 6019.5 (lower Bollinger band) and the pivotal 5988-5987 zone. A breakdown below this range would shift focus to deeper supports at 5973 and 5930.75. The long-term bull/bear trigger remains at 5825, and a breach of this level would signify a much larger structural shift.

For today, watch 6049 closely as the make-or-break level, with a lean towards selling rallies below it and buying dips above it.

NQ – Week to Week

The intraday bull/bear line for NQ today is at wpv (21,589). Staying above this level could provide a push toward the 21,800-21,900 zone, where resistance at ubb1 (21,827.25) and pr (21,903) comes into play. If bulls can gain momentum beyond 22,000, the next major resistance is ubb2 (22,061) and r1 (22,199.75).

The longer-term bull/bear line remains at 22,080, and we continue to be in a bearish long-term trend. If NQ remains below 21,589, look for downside pressure toward mavg (21,593) and lbb1 (21,360). Further weakness could lead to tests of ps (21,275) and pl (21,242.5). The next significant support lies at lbb2 (21,126) and s1 (20,979), where buyers may step in.

Today’s session will likely see choppiness around key levels. Watch for price action at the bull/bear line to determine direction and trade accordingly.