Weak ADP

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Our View

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While this may be scary for the public to watch, this is heaven on wheels for futures traders. Up and down and all around—another 100+ point range for the ES. Like I said on the Twitter livestream, I have not seen more 100 to 150-point moves since the credit crisis.

According to JP Morgan, retail accounts liquidated $1.2 billion in the first hour. Is that a good thing? Well, the S&P hit its lowest level since November on Tuesday, erasing all of the post-election gains. It sold off hard Wednesday morning but then rallied almost 120 points off its low after the administration signaled some potential relief on tariffs after Trump imposed 25% across-the-board duties on Canada and Mexico.

This all seems like a big game of chess that I think the public and our trading partners are getting tired of. That said, it looks to me that the ES and NQ are backfilling or attempting to trade above 5900. While I think the Fed’s hands are tied, investors are starting to bet that the Federal Reserve will ride to the rescue, as interest-rate futures are pricing in a stronger likelihood of a May rate cut.

The 10-year note yield rose to 4.24%, crude oil fell more than 1%, copper futures surged nearly 5% after President Trump reiterated plans to hike tariffs on key metals, Bitcoin rebounded back to nearly $90,000, and the dollar dropped.

I have to admit—I’m confused. After trading down to 5744, the ES traded up to 5869.50 yesterday. On one side, I see buying/short covering and a ton of buy stops above 5880. But on the other side, I know that when the ES and NQ look their best, it often ends up being a sale.

That said, here’s how some major stocks closed:

Despite all the negative talk, the Magnificent 7 stocks have been rebounding.

The ES has had a nice bounce, it’s up against resistance as the trade wars continue. The ongoing unwind of the popular artificial intelligence trade has weighed heavily and chipmaker Marvell Technology dropped more than 16% after issuing mixed first-quarter guidance, dragging other chip makers down with it.

Our lean: Continue to be cautious, with 5900-5920 as a key resistance zone. Overnight, the ES dropped down to the 5775 level, down over 1%. Yes, the Magnificent 7 stocks had a nice pop yesterday, but the NQ futures are currently down over 1.5%. I can’t rule out buying the open, but this is still a sell-the-rallies market.

Equities CTA Flows – 3/5/2025

Over the Next 1 Week:

Over the Next 1 Month:

Key Pivot Levels for SPX:

MiM and Daily Recap

The session began with a weak overnight performance, as ES hit a low of 5779.00 at 9:03 AM before attempting a recovery. A strong push lifted prices to 5817.00 by 10:06 AM, marking a 38.00-point gain (+0.66%) from the prior low. However, sellers regained control, dragging the ES to a fresh low of 5750.75 at 11:45 AM, erasing 66.25 points (-1.14%) from the morning’s high.

From there, momentum shifted upward. A broad-based rally began at midday, taking ES to a new session high of 5832.00 at 1:06 PM, reflecting an 81.25-point advance (+1.41%) from the earlier low. A brief pullback at 1:09 PM found support at 5797.75, shedding 34.25 points (-0.59%) before the uptrend resumed.

The rally extended into the late afternoon, peaking at 5869.50 by 3:09 PM, marking a 77.75-point gain (+1.34%) from the midday low. The session then turned choppy, with a late-day dip to 5834.00 at 3:51 PM before closing the regular session at 5850.75, up 62.75 points (+1.08%) from the open and up 60 points or 1.04% from the previous day’s settlement. 

The overall sentiment leaned bullish as buyers controlled the majority of the session after the morning weakness. Volume remained solid, with the regular session trading 1,764,285 contracts and the full session reaching 2,215,437 contracts.

The Market-on-Close (MOC) imbalance data showed a total imbalance of $535M, with 58.9% of the flow on the buy side. The symbol imbalance ended at 53.7%, favoring the bulls but without an extreme imbalance. The peak imbalance at 3:54 PM reached $1.132B to buy, helping sustain prices into the closing print.

How to read the MiM

Technical Edge

Fair Values forMarch 6, 2025

Daily Breadth Data 📊

Weekly Breadth Data 📈

Guest Posts:

Dan @ GTC Traders

Unknown Outcomes

Many new and aspiring retail traders come to market veterans with the same set of questions. Should I buy this market? Should I short that market? They ask with the expectation that a veteran trader—someone who has spent years navigating price action, market structure, and trading strategies—has a special insight into whether the market will rise or fall. The assumption, often unstated, is that experience grants a sort of predictive edge, a crystal ball into future price movements.

It is without question … a false assumption.

Markets are not some static puzzle waiting to be solved. They are fluid, dynamic systems where prices are driven by millions of participants, algorithmic models, fundamental changes, and, most crucially, randomness. The reality is that no trader, no matter how seasoned, can predict with certainty what will happen next.

Random Outcomes

Mathematically, financial markets are built on the foundation of probability and randomness. Consider a fair coin flip. The outcome of any individual toss is unknowable beforehand—heads or tails could land with equal probability. But across thousands of flips, patterns emerge: an expected frequency of heads and tails, a normal distribution of results, and variations that fit within a measurable standard deviation.

Markets function similarly but with added layers of complexity. Price action is influenced by unpredictable events: geopolitical shifts, economic data surprises, central bank policy changes, even a hedge fund unwinding a large position. Short-term outcomes in the market—whether a stock rallies or sells off—are as random as a coin toss. What traders can influence, however, is their ability to place bets where the odds of long-term success tilt in their favor.

Jim Simons, founder of Renaissance Technologies and arguably one of the greatest quantitative traders in history, understood this principle better than most. His firm used advanced statistical models to exploit inefficiencies in the market, but even he acknowledged the role of randomness: “We don’t have any idea whether the market is going to go up or down. We just find small edges, trade them, and stick to the process.”

he Flawed Search for Certainty

New traders often believe the key to success lies in correctly predicting whether a market will rise or fall. But this is a flawed approach. No one—not the most respected analyst, not the sharpest trader— can consistently predict short-term moves. That isn’t where trading success comes from.

Instead, professional traders focus on probability and payout structure. They design trading programs that offer a positive expectancy—where wins outweigh losses over time, even if losses occur frequently. In other words, it is not about being right on every trade; it is about structuring trades where being right yields more than being wrong costs. This is why professional traders do not spend their energy trying to answer, “Will this market rally?” Instead, they focus on risk-adjusted returns, expected value, and a repeatable process that accounts for randomness.

Expectancy Over Predictions

A trader who understands randomness focuses less on individual outcomes and more on the overall system. If a strategy has a 40% win rate but the average winning trade earns twice as much as the average losing trade, the system remains profitable over the long run. This is why trading legends emphasize risk management, position sizing, and execution over prediction.

Every trade is a roll of the dice within a structured framework. The moment a trader internalizes that markets are driven by uncertain outcomes, the mindset shifts. The focus is no longer on trying to guess where the market is headed next but on executing trades where the risk-to-reward ratio justifies taking the bet.

So when the question comes—Should I buy this market? Should I short that market?—the answer from a seasoned trader will always be the same: “I don’t know. But let’s talk about your strategy, your risk parameters, and your expected payout structure.” Because that, not prediction, is the foundation of successful trading.

Until next time, stay safe … and trade well.

Trading Room News:

Polaris Trading Group Summary: Wednesday, March 5, 2025

The trading session started with a bearish lean, as PTGDavid noted that the market was favoring sellers early on. However, the session was filled with “snap and trap” price action, creating a choppy environment with frequent fake-outs and reversals. Despite the initial selling pressure, traders had to stay nimble as price action shifted rapidly, providing both challenges and opportunities throughout the day.

Morning Session Highlights:

Midday & Afternoon Action:

Power Hour & End-of-Day Reversal:

Key Takeaways & Lessons:

A wild Range Runner day filled with volatility, proving once again—survival of the fittest in futures trading!

DTG Room Preview – Thursday, March 6, 2025

Market Overview:

U.S. stocks rallied after President Trump granted a one-month tariff exemption for Mexico and Canada in the auto sector. However, private-sector job growth slowed sharply to 77K in February, missing expectations and raising concerns ahead of tomorrow’s nonfarm payrolls report.

Crude oil slid to a six-month low, with WTI hovering around $65 per barrel, as trade war fears intensified. Intel (INTC) dropped 4% after Trump criticized the CHIPS Act, dragging semiconductor stocks lower. Meanwhile, Disney (DIS) announced a 6% workforce cut (~200 jobs) and the shutdown of its political and data-driven news site, 538.

Earnings Watch:
Premarket earnings: NetEase (NTES), Kroger (KR), ABEV, BJ, BURL, CNQ, JD, RTO, ULS, VG.
After the bell: Broadcom (AVGO), Costco (COST), CRH, GWRE, HPE, IOT, COO.

Key Economic Events (ET):
8:30 AM: Unemployment Claims, Nonfarm Productivity, Unit Labor Costs, Trade Balance.
10:00 AM: Wholesale Inventories.
Fed Speakers: Philly Fed’s Harker (8:45 AM), Fed Governor Waller (3:30 PM).

Market Sentiment & Levels:
Volatility continues rising, with the ES 5-day average daily range now exceeding 140 points. Whale bias is slightly bullish ahead of the 8:30 AM economic reports amid moderate overnight large trader volume. ES price action: The market remains in a high-volatility yo-yo pattern, bouncing off its 200-day MA (5849.50) before a strong bearish overnight move.

Calendars

Economic Calendar Today

This Week’s High Importance

Earnings:

Released

Full Calendars

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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!