by Danny Riley

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Our View

From its 01/28/26 high at 7043 to last night’s 6751.50, the ES has fallen in five of the last six sessions for a total point loss of 281 points or -4%. The last time the S&P dropped 5% was around April 2, 2025 (“Liberation Day” tariff announcements by President Trump), with the steepest drops on April 3 (4.84% loss) and April 4 (5.97% loss).

The NQ made a high at 26,296.0 on 1/29/26, and it made a Globex low last night at 24,293.75 — a drop of 2,056.25 points or -7.82%. The last time the Nasdaq dropped 10% was March 6–7, 2025.

Like I said yesterday, the markets — and I don’t just mean the S&P and Nasdaq — are spooked. A big part of this is Bitcoin (BTG26): futures made a high at 129,910 on October 5, 2025, and made a low last night on Globex at 60,005. That equals a total loss of 69,905 points or approximately 53.8% from the peak.

All three of these markets have had a good bounce. Right now at 10:49 PM, the BTG25 is trading at 64,800, up 1,005 points or 1.65%, the ES is trading at 6,793.75, down 27.00 points or -0.40%, while the NQ is trading at 24,486.00, down 165 points or -0.67%.

All I can say is the BOTs have taken over.

Our Lean

I’m sorry, I’ve had a snafu with the AI tool Claude. I can’t seem to get the same file I used to calculate the ES levels. I don’t think they are the “best” levels, but they’ve been good, and I want to nail this down.

That said, today is week one of February options expiration, and while the ES, NQ, and BTG are all oversold, I’m not sure that matters. Did the BTG make a low? I’m not sure, but the bounce is significant and 60,000 held. Are the ES and NQ going down? I’m not sure about that either, but if the ES takes out 6750, I don’t think that would be good, and it would open the door to a larger drop.

As for the NQ? Well, it’s closing in on a 10% drop.

And lastly, there is still a very high level of saber-rattling going on between the US and Iran. Despite Iran being significantly outclassed by the US military, Iran seized an oil tanker and is threatening a massacre in the Strait of Hormuz just hours before the US talks.

Our lean: I would like to be more specific about the ES, but as I said, I think 6750 is a critical level, and this remains a very fluid situation.

What I can say is: all three seem very oversold.

Guest Posts:

SpotGamma Founders Note:

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night’s Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Founder’s Note:

Futures are 50bps higher with no major data on deck for today.

6,900 is resistance, with support at 6,800, 6,740, then we start to look at that 6,600’s “wash out” level (see y’day note). TLDR: the smoke hasn’t cleared, and we see no reason to get long this market for anything outside of a day trade. we want to see negative gamma reduce before dipping our toes in the water. Should SPX trade down in the 6,600’s we may change our tune on that, as that area is where vol premium would become interesting.

Gamma (solid line) starts off in a flag to negative stance, but if you remove the 0DTE options sellers you see GEX (dashed line) is rather sharply negative across the board. Given this, it’s key to note the AM rally feels nice, but is no signal of forward stability. Further, you can see that the gamma lines trough to 6,650-ish area (vs 6,675 we saw y’day). This lower troughing area is the result of more traders buying put protection. IVs are about 1/2 a vol point lower vs yesterday, which syncs with higher equity futures. That offers some relief, but its hardly a state change in bearish dynamics.

On the put-buying topic, we see names “going convex”. Compass here is set to IV Rank (Y axis) vs Put Skew (x axis). Those names in the top right corner are therefore either in the throes of death (MSTR) or traders are bracing for impact.

To place this into context, the SPX is 3% off of all time highs which were set just 4 days ago. But, suddenly, the world is a disaster and we see certain sub sectors getting absolutely wrecked (software, crypto, etc). Given this we are still viewing this whole saga as a re-normalization of vols. Just as stuff had to over-travel to the upside (i.e. calls getting too bid), it seems we have to drive those put values to extremes, too. Some stuff seems to be getting on objectively fat risk premium, which should start to draw out some vol sellers. If and when that happens more broadly, it will offer some stability to markets.

For SPX we suspect that area is 6,675 (if it gets there), which would likely have VIX near 30. Software, we think, is starting to offer some large premiums, with IGV now off 30% YTD. It is quite possible though that this ends with a “correlation slam” which means that more stuff catches fully down to tech/software/metals etc.

Putting this into context, here is the 3-month performance of various sector ETF’s. Software is infecting XLK (tech), and Mags are quite frankly not offering a bid. Losing the leaders, so to speak has not yet impacted the indices, but that is the concern.

On the topic of MSTR, wow….

This feels almost like Captain Condor in that the whole street knows your position and price, and they are coming for you. For reference BTC is 67k this AM…

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Market Recap

The ES traded down to 6846.75 at 9:23 AM on Globex with 360k contracts traded. It opened Thursday’s regular session at 6853.50, dropped straight down to 6831.25, and then rallied up to 6881.50. From there, it sold off 78.75 points down to 6802.75 at 10:30 AM, rallied back up to 6828.75, and then sold off to a new low by 6 ticks down to 6801.25.

The market then rallied 50 points up to 6851.25 at 11:35 AM, pulled back to 6833.25 at 11:45 AM, and rallied up to 6859.25. It sold off down to 6833.50 at 12:20 PM and then rallied up to 6870.25 at 12:45 PM. Later, it sold off to 6820.25 at 1:50 PM, traded back up to 6859.25, and sold back off to 6808.75 at 3:45 PM. It traded 6813.50 as the 3:50 PM cash imbalance showed $300 million to buy, traded 6805.25, started going bid, and traded 6817.75 on the 4:00 PM cash close.

After 4:00 PM, the ES traded up to 6828.50 and then dropped 42.75 points all the way down to 6785.75 at 4:35 PM and settled at 6788.75, down 117 points or -1.70%. The NQ settled at 24,425.25, down 574 points (-2.30%); the YM settled at 48,878.00, down 711 points (-1.43%); and the RTY settled at 2588.10, down 44.60 points or -1.69%.

In the end, it was another day of shake, rattle and roll, but literally, everything was down but the grain futures. In terms of the ES and NQs’ overall tone, they were sick on the open and got sicker after the 4:00 cash close. In terms of the ES’s overall trade, volume was high with 2.03 million contracts traded.

On Tap

10:00 am – Consumer Sentiment
12:00 – Fed Vice Chair Philip Jefferson speaks
3:00 pm – Consumer credit

Key Drivers of the Sell-off

Tech & Cyber Rout: Qualcomm plummeted over 8% on weak Q2 revenue guidance, while CrowdStrike led a cybersecurity retreat with a 9% drop.
Labor Market Cracks: * Challenger Job Cuts: Surged 118% YoY (108,435), the worst January since the 2009 Great Recession.
- Job Openings (JOLTS): Hit a 5.25-year low (6.542M), missing expectations by nearly 700k.
- Jobless Claims: Jumped to 231k, hitting an 8-week high.
Hawkish Fed: Governor Lisa Cook signaled that inflation risks remain “tilted higher,” justifying the decision to keep rates elevated to maintain Fed credibility.
Crypto Exodus: Bitcoin’s plunge was exacerbated by a massive reversal in ETF sentiment, with $5 billion in outflows over the last three months and over $1 trillion in total crypto market cap wiped out from recent peaks.

Technical Context

While the S&P 500 is currently down about 4% from its January all-time high of ~6800, we are still technically in “pullback” territory. For this to be considered a formal correction, the index would need to drop to roughly 6300 (a 10% decline).

MiM

Market-On-Close Recap

The February 5 Market-on-Close auction opened with a mixed but constructive tone, showing early signs of rotation rather than outright liquidation. Initial imbalances around 15:50 ET were net sell-skewed, with total imbalance near -$670M, but buy programs quickly stepped in. By 15:51–15:54, the tape flipped decisively positive, peaking near +$584M as buyers pressed size across multiple sectors. This early strength suggested institutional rebalancing rather than panic, with flows spreading broadly before the more decisive late-minute shift.

Sector activity revealed a clear split between defensive accumulation and growth-oriented distribution. Consumer Cyclical stood out with a strong +72% buy lean and over $230M net buying, signaling continued interest in discretionary exposure despite recent volatility. Energy, Utilities, Healthcare, and Industrials all posted buy leans north of +54%, with Energy and Utilities exceeding +70%, indicating more wholesale accumulation rather than simple rotation. These readings, well above the +66% threshold, point to programmatic demand rather than marginal reweighting.

In contrast, Technology and Communication Services were the clear sources of supply. Communication Services registered a heavy -75% sell lean, a textbook wholesale sell signal, while Technology posted a -56.7% lean with large dollar outflows concentrated in mega-cap software and internet names. This was confirmed in the symbol-level data, where ORCL, GOOGL, META, MSFT, and MU dominated the sell side, while selective buying appeared in healthcare names like LLY and ABBV, and in energy via CVX.

The final five minutes told the real story. From 15:55 through 15:58, sell programs overwhelmed earlier buying, driving total imbalance to a session low near -$1.1B. Although there was some stabilization into the 16:00 print, the close ultimately reflected a rotational “risk-off within risk-on” dynamic: NYSE and S&P 500 closed with positive net imbalances, while NASDAQ finished deeply negative, near -$352M.

Overall, this MOC was less about broad liquidation and more about deliberate repositioning. Strong sector leans above +66% highlighted institutional accumulation in defensives and real-economy exposures, while sub–66% readings in tech and communications underscored targeted de-risking rather than market-wide selling.

How to read the MIM

ES Levels

The bull/bear line for the ES is at 6836.50. This is the key pivot for today. Acceptance above this level keeps the market in a recovery posture, while sustained trade below it shifts control back to sellers.

ES is currently trading near 6856.75, holding just above the bull/bear line after a sharp liquidation move. As long as price remains above 6836.50, buyers can attempt to build value higher, but trade remains fragile and reactive.

On the upside, first resistance is at 6915.50, followed by 6935.25. The upper intraday range target is 6929.50. A push and hold above this zone would suggest short covering continuation toward the low 7000s, but failure here likely leads back into balance.

On the downside, a loss of 6836.50 opens the door to 6820.75 and then 6785.00. The lower intraday range target sits at 6743.50. A move into this level would signal renewed liquidation pressure and a potential extension lower.

Overall, the ES remains neutral-to-weak above 6836.50 and outright bearish below it. Expect volatility and fast rotations around the bull/bear line as the market digests the recent selloff.

NQ Levels

The bull/bear line for the NQ is at 24,705.75. This remains the key pivot for directional bias today. Holding above this level keeps the door open for responsive upside, while acceptance back below would reinforce the broader bearish tone.

NQ is currently trading near 24,797.25 after a sharp liquidation move. This bounce is occurring from deeply oversold conditions but has not yet reclaimed meaningful resistance. As long as price holds above 24,705.75, upside probes toward 25,061.75 and then 25,169 are possible, with the primary upside target at 25,227.75.

If the market fails to hold above the bull/bear line, look for renewed downside pressure. Initial support sits near 24,651, and a failure there opens the door back toward 24,407.25. The lower range target for today is 24,183.75, which would be a measured move. Anything below that would indicate a continuation of selling.

Overall, this remains a volatile, countertrend environment. Bulls need sustained acceptance above 24,705.75 to stabilize the tape, while continued rejection below 25,061.75 keeps the risk skewed to the downside.

Technical Edge

Fair Values for February 6, 2026

SP: 20.09
NQ: 87.18
Dow: 77.5

Daily Breadth Data 📊

For Thursday, February 5, 2026

NYSE Breadth: 29.5% Upside Volume
Nasdaq Breadth: 23.0% Upside Volume
Total Breadth: 23.8% Upside Volume
NYSE Advance/Decline: 33.9% Advance
Nasdaq Advance/Decline: 23.5% Advance
Total Advance/Decline: 27.3% Advance
NYSE New Highs/New Lows: 163 / 106
Nasdaq New Highs/New Lows: 158 / 569
NYSE TRIN: 1.30
Nasdaq TRIN: 1.02

Weekly Breadth Data 📈

Week Ending Friday, January 30, 2026

NYSE Breadth: 46.1% Upside Volume
Nasdaq Breadth: 45.8% Upside Volume
Total Breadth: 45.9% Upside Volume
NYSE Advance/Decline: 46.6% Advance
Nasdaq Advance/Decline: 35.4% Advance
Total Advance/Decline: 39.5% Advance
NYSE New Highs/New Lows: 452 / 119
Nasdaq New Highs/New Lows: 667 / 458
NYSE TRIN: 0.99
Nasdaq TRIN: 0.64

Calendars

Economic Calendar Today

This Week’s High Importance

S&P 500 Earnings:

Upcoming:

Recent:

Full Calendars

Trading Room News:

Polaris Trading Group Summary – For Thursday, February 5, 2026

The session unfolded as a textbook Cycle Day 2 (CD2)—with early structure, sharp liquidation, and valuable lessons in patience, alignment, and risk control. PTGDavid guided the room closely, reinforcing process over prediction throughout the day.

Pre-Market Framework

The day began with a clear, disciplined roadmap from PTGDavid:

Cycle Day 2 Objective
- Optional back-test of the Cycle Day 1 low (6862.50)
- Hold support
- Rebuild upside momentum toward 6938–6959
Expectations Set
- CD2 favors balance, consolidation, and digestion, not aggressive expansion
- Bulls needed acceptance above 6895 ±5
- Bears favored acceptance below that same zone

This preparation proved critical as volatility picked up.

Morning Action – Breakdown & Liquidation

Early acceptance lower led to long liquidation, confirmed by:
- Heavy volume on downswings
- Rotation behavior instead of clean trend
PTGDavid identified DLMB / Cycle Violation Level reversal zones, offering “long lean” opportunities for those aligned with structure and managing risk tightly.
Macro uncertainty and discussion around possible distribution kept expectations realistic.

Key theme introduced:
“Today’s theme >>> Long Liquidation”

Standout Trade

One of the day’s highlights came from Manny:

Executed a support buy at 6801–6805
Scaled effectively for +22 points
Recovered an early loss and finished firmly green

PTGDavid praised the execution as well planned and well played.

This trade exemplified:

Patience
Trust in statistical levels
Proper sizing and exits

Midday – Stabilization Attempt

Price stabilized around the IB Low (approximately 6805) and OPR Low (approximately 6831)
Bulls managed a push back toward mid-VWAP and the neutral zone
PTGDavid noted solid buy responses from Deep Cycle Day 2 Statistical Violation Zones
Long inventory was repriced at more favorable levels

Afternoon & Close – Risk Off

Despite a $300M MOC buy imbalance, selling pressure persisted
Bulls failed to regain control
Market closed near the lows:
- Back into Cycle Day 2 lower statistical violation levels (around 6813)
- Clear risk-off tone
- Continued long liquidation across correlated markets

Key Takeaways

Cycle rules mattered, with Cycle Day 2 behavior playing out as expected
Statistical levels provided objective trade locations
Risk management and hard stops protected capital
Alignment with the dominant force remained more important than bias or prediction

DTG Room Preview – Friday, February 6, 2026

Market Focus: Amazon Earnings & Tech AI Spend
Markets are digesting last night’s Amazon (AMZN) earnings miss, with shares down 11% after a weak operating income forecast. Concerns are centered around the tech giant’s $200B AI spending plan for 2026, with ROI under scrutiny. Broader indices are red, with 9 of 11 S&P sectors in retreat, as markets reevaluate extended rallies.

Job Cuts Spike
New Challenger data shows the largest job cut surge since 2009, fueling fears of a cooling labor market. The delayed January Jobs Report is now due next Wednesday due to the government shutdown.

Metals & Crypto Slide

Gold dipped below $4700 and Silver below $64 overnight amid waning Chinese demand.
Bitcoin plunged near $63,000, erasing all gains since the Trump-fueled bull run.

Auto Sector Pain – Global & China

China’s BYD is down 40% from ATH, with January deliveries cut in half YoY.
XPeng posted a 30% drop in deliveries.
Raw material costs (lithium, copper, aluminum) are surging, straining margins.
Toyota saw a 43% drop in quarterly profit and named CFO Kenta Kon as new CEO. Despite higher global sales, rising costs and Trump’s tariffs were cited as pressure points.

Economic Calendar Highlights

10:00am ET – University of Michigan Sentiment & Inflation Expectations
12:00pm ET – Fed’s Philip Jefferson speaks on inflation dynamics (Brookings Institution)

Volatility Watch

ES has posted 100+ point swings in 5 of the last 6 sessions.
5-day ADR now at 125.0 pts — climbing for 6 sessions straight.
Despite bounce attempts, short bias persists into the U.S. open with significant overnight volume.

ES Technicals

Broke below short-term uptrend channel; now retesting resistance.
Short-term trend down.
Key levels:
- Resistance: 6898/03s, 7005/00s, 7108/13s
- Support: 6705/00s, 6057/52s

Premarket Earnings: BIIB, PM, AER, CG, CNC, LTM, NVT
Monday Earnings Preview: APO, BDX, CLF, KD

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Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!!