by Danny Riley

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Warning Signs: Buffett’s Cash Stash, Tariff Concerns, and Bearish Signals

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Our View

I’m not happy with myself. I talked about the last two weeks of February being weak and listed the Stock Trader’s Almanac weak options expiration stats, but I didn’t switch gears—and that bothers me.

This also isn’t the first time I’ve talked about how the Fed is behind the eight ball, how inflation is rising, gold hitting $3,000, the bond market, tight credit, and the U.S. debt approaching $37 trillion. Like I said, this is not 2023 or 2024—there’s a new sheriff in town, and one of his favorite words is tariffs.

I didn’t write it, but I had a feeling that when the S&P cash made a new high and the futures didn’t, it was a bad sign. Even more concerning was what the PitBull said: a lot of stocks have skyrocketed, but they have no earnings. On top of that, there’s the public’s high level of complacency. And if none of that strikes you, one of the best traders in the world—Warren Buffett—has Berkshire Hathaway sitting on a record level of cash and T-bills. Goldman Sachs’ flow-of-funds guru, Scott Rubner, even noted, “A bearish equity trade is developing.”

Thursday and Friday’s losses erased the gains from the week, while bonds rallied 30 points on Friday. At the same time, the sale of existing homes fell 4.9% last month. Lennar Homes, one of the largest home builders in the U.S., was trading around $182 on October 17 and $144 on January 21, but it fell to a low of $119.36 on Friday—that’s very hard to overlook.

Another piece of this is that I think investors are cooling on Trump’s unending tariffs and tariff threats, as well as the president’s media company starting an investment fund. Shares in Trump Media and Technology (DJT), the parent company of the Truth Social platform, fell 3% after a morning rally.

At the end of the day, there are a lot of moving parts—not all of them good—and I think Thursday and Friday’s price action was very telling.

Our Lean

The last week of February could get rough, there are no economic releases today, but there are 12 starting Tuesday that include the PCE number on Friday, the last trading day of February, and 11 Fed speakers.

Our lean, after a big drop like Friday, the ES usually bounces. The pit high in the ES was 6142.40 and the low 6024.50; that’s 117.9 points. 50% of that is 59.95 points or 6084.45. It’s 10:30 PM, and the ES’s Globex high is 6059.25. I’m not sure about today; we could see a further pop up, but like the Stock Trader’s Almanac said, “The week after the February options expiration week is miserable, Dow down 15 of the last 26 but up 8 of the last 13, 2020 down 14.4%, the 5th worst week since 1950.”

MiM and Daily Recap

Pre-market during the Globex session, the full session’s high was set at 9:00 AM at 6142.50. The cash session opened at 6132.50. At 10:42 AM, the ES hit its first major low at 6087.50, representing a significant -55.00 point drop (-0.90%) from the Globex high. Buyers attempted to regain control, leading to a rebound toward 6105.25 at 11:36 AM, but the relief rally stalled, and the downtrend resumed into the afternoon session.

Selling pressure intensified after midday, with a deeper leg down hitting 6024.50 at 2:42 PM, a decline of -80.75 points (-1.32%) from the prior high. This three-hour stretch of relentless selling locked in the low of the day. The market attempted to stage another rebound, reaching 6039.25 at 3:30 PM, but once again failed to hold momentum, eventually settling into a consolidation zone. The final lower high of the session was marked at 6034.75 by 4:00 PM before fading into the close.

By the session’s end, the ES settled at 6030.25, logging a net loss of -102.25 points (-1.67%) from open to close in the regular session and -107.00 points (-1.74%) from the prior cash close.

The market exhibited strong selling pressure throughout the session, with lower highs and lower lows dominating price action. Sellers remained in control, with minimal bounce strength at key retracement levels. Volume was notably elevated at 1,626,709 contracts in the cash session and 1.8M over the full day, reinforcing the strong directional move.

The Market on Close (MiM) data further confirmed the bearish tone. The imbalance was heavily skewed to the sell side, with $1.3B in sell imbalances at 3:50 PM. The dollar percentage leaned -61.6% to the sell side, while 53.5% of symbols had sell imbalances, indicating broad-based selling pressure across multiple sectors.

At the end of the day, there are an abundance of moving parts, not all of which are good, and I think Thursday and Friday’s price action was very telling.

How to read the MIM

Technical Edge

Fair Values for February 24, 2025:

SP: 15.23
NQ: 60.63
Dow: 71.073

Daily Market Recap 📊

NYSE Breadth: 24% Upside Volume
Nasdaq Breadth: 36% Upside Volume
Total Breadth: 34% Upside Volume
NYSE Advance/Decline: 26% Advance
Nasdaq Advance/Decline: 25% Advance
Total Advance/Decline: 25% Advance
NYSE New Highs/New Lows: 54 / 73
Nasdaq New Highs/New Lows: 102 / 147
NYSE TRIN: 1.18
Nasdaq TRIN: 0.58

Weekly Market Recap 📈

NYSE Breadth: 45% Upside Volume
Nasdaq Breadth: 53% Upside Volume
Total Breadth: 50% Upside Volume
NYSE Advance/Decline: 34% Advance
Nasdaq Advance/Decline: 31% Advance
Total Advance/Decline: 28% Advance
NYSE New Highs/New Lows: 183 / 129
Nasdaq New Highs/New Lows: 396 / 312
NYSE TRIN: 1.18
Nasdaq TRIN: 0.58

Room Summaries:

Polaris Trading Group Summary Friday, February 21, 2024

Overview:

Today was a strong “Gravy Day” for traders following the dominant short-side momentum. With options expiration (OPEX) influencing price action, PTG traders capitalized on well-defined trade setups, particularly using the Open Range Strategy. The focus remained on short plays throughout the session, and multiple targets were successfully hit.

Key Market Events & Trades:

Pre-Market Setup:
- The NQ “Line in the Sand” held overnight, leading to an initial upside target of 22195-22225 being fulfilled before the regular trading hours (RTH).
- OPEX was anticipated to drive the day’s rhythms, with reference to the DTS Briefing for key insights.
Morning Session:
- Short bias was established early off the open, aligning with dominant market forces.
- The Volatility Trigger at 6120 was identified as a key level for continuation or reversal.
- CL Open Range Short was triggered successfully.
- NQ short targets began filling:
  - Lower target zone of 22050 – 22011 was met.
  - Violation of the Volatility Trigger accelerated the move lower.
  - Open Range Strategy played out well with TGT1 and TGT2 being hit.
Midday Action:
- The market tagged the CD1 Low and reversed, leading to some balancing action.
- David stepped away for meetings, but the short-side strategy remained in play.
Afternoon Session:
- The market continued following the downward trajectory as anticipated.
- Cycle Day 2 Violation Level at 6043 was fulfilled.
- Another Open Range Strategy Trifecta was a success.
- No buyers stepped in before the weekend, reinforcing the bearish momentum.
- The final NQ target at the CD2 Violation Level of 21680.69 was tagged to wrap up the day.

Lessons & Takeaways:

Staying aligned with the dominant force was key, as short-side momentum was clear and traders who followed the plan reaped rewards.
Volatility Triggers provided great trade confirmation, with the 6120 level break accelerating the move lower.
The Open Range Strategy continued to be highly effective, with multiple targets hit throughout the day.
Flexibility remained crucial, as the market showed some balancing but maintained its main trend.

Final Thoughts:

A fantastic trading day with precise execution of short plays and solid trade alignment with market conditions. Patience and discipline paid off, reinforcing the importance of sticking to the strategy.

DTG Room Preview – Monday, February 24, 2025

Market Recap & Key Developments
- Friday Sell-Off: The S&P 500 dropped 1.7%, Nasdaq fell 2%, and Dow Jones slid nearly 3% after Walmart’s (WMT) cautious outlook, inflation concerns, and tariff risks.
- Gold Surge: The metal marked eight consecutive weeks of gains, nearing the $3,000/oz level as investors seek safe-haven assets.
- Volatility on the Rise: Friday’s sell-off pushed ES 5-day average range to 56 points, with the market poised for increased swings.
Earnings Spotlight: Nvidia Takes Center Stage
- Nvidia (NVDA) reports Wednesday after market close. Despite its underperformance in 2025, it remains the most profitable AI stock, trading at a low forward EPS (31) compared to peers like Broadcom (AVG – 35) and Marvell Technologies (MRVL – 41).
- Big market implications: A potential EPS normalization and CEO Jensen Huang’s AI outlook could trigger significant volatility.
- Other Key Earnings: Home Depot (HD), Lowe’s (LOW), and Salesforce (CRM) also report this week.
Economic Focus: PCE Inflation & GDP Estimates
- Core PCE Index (Friday): Expected to show slower price increases than last week’s CPI report.
- Q4 GDP Estimates: Updates on economic growth, consumer confidence, and housing prices also due.
Market Sentiment & Economic Risks
- Darkening Business Outlook: S&P Global’s Chris Williamson notes a shift from early-year optimism to rising uncertainty, stagnant business activity, and cost pressures due to government policy concerns.
- Immigration & Growth Risks: Morgan Stanley warns that immigration restrictions could have a GDP impact similar to tariffs. A decline in immigration from 3M/year (2022-2024) to 1M in 2025 and 500K in 2026 could cut GDP to 2% this year and 1%-1.5% by 2026.
Technical Levels & Market Positioning
- ES Futures Holding Key Support: Friday’s sell-off tested the bottom of a short-term uptrend channel (6036/39) and the 50-day MA (6048)—both holding so far.
- Key Resistance Levels: 6151/54, 6311/16, 6502/07.
- Key Support Levels: 6036/39, 5952/57, 5675/70.
No whale bias overnight due to light large trader volume.

📊 Chart Reference: Market Levels

ES Week vs. Week

The bull/bear line for today is set at 6,051, making it the key pivot level to determine market direction. If price stays above this level, buyers will likely maintain control. However, a move below this level could invite further selling pressure.

On the upside, immediate resistance is at 6,093.75 which is today’s high range level. If the bulls can push through, the next target is 6,128.75, followed by 6,142.5, which would indicate a stronger breakout attempt and a rejection of Friday’s action.

On the downside, immediate support is at 6029 and 6,024, with further downside risk extending to 6,008. A break below these levels would put 5,967.75 in play as a major support zone.

With the market currently trading near 6,061, holding above the bull/bear line will be crucial for continued bullish momentum. If sellers regain control and push price below 6,059, expect a test of lower support levels. The long play bull/bear line remains at 5959.75 and if that is crossed will put us on a longer term bear trend for the market.

NQ Week vs. Week

The intraday bull/bear line sits at 21,782, making it the key level to watch today. Holding above this zone keeps the bullish case alive, while dipping below it could open the door for sellers to take control.

The overnight session has been relatively stable, but momentum is still uncertain. Bulls will need to push past 21,985 to start reclaiming lost ground, with 22,004 as the target high value for the day. If buyers can sustain strength, a move toward 22,136 and 22,245.5 could develop, but resistance remains firm at those levels.

On the downside, immediate support is at 21,670-21,650. If that level breaks, expect further selling pressure toward 21,570, which is the target low for the day. A move below 21,570 could accelerate losses down to 21,366, with deeper risk extending to 21,143.

The longer-term bull/bear switch sits at 21,198; trading below that would have us favoring shorts on a longer-term basis.