Daily Analysis - Monday, 1/27/25
Blood is running in the streets this morning, with DeepSeek rocking the market over the weekend. Will the blood continue to run, or will buyers step in and stop it?
Disclaimer
This publication and its authors are not licensed investment professionals. Nothing posted on The Shmuts blog should be construed as investment advice. Do your own research.
The Week Ahead
I hope you enjoyed the rally while it lasted! With the news of DeepSeek’s AI model rocking the market over the weekend, the market is in full risk-off mode. Money is flowing out of the market and into treasuries, with the 10-year yield dropping to 4.52%. I don’t think we will get a break in volatility this week, with FOMC and Big Tech earnings on the agenda. Daytraders should pay close attention to the news, be flat before data releases, and stay focused when they have a position on.
Monday - 1/27/25
10:00am EST - US New Home Sales - Units (Expected: 0.627M)
Tuesday - 1/28/25
8:30am EST - US Durable Goods (Expected: 0.5%)
10:00am EST - US CB Consumer Confidence (Expected: 105.6)
Wednesday - 1/29/25
2:00pm EST - US Interest Rate Decision (Expected: 4.5%)
2:00pm EST - FOMC Rate Statement
2:30pm EST - FOMC Press Conference w/ Powell
4:05pm EST - Meta Q4 2024 Earnings
4:05pm EST - Tesla Q4 2024 Earnings
4:05pm EST - Microsoft Q2 2025 Earnings
4:10pm EST - IBM Q4 2024 Earnings
Thursday - 1/30/25
8:30am EST - US Initial Jobless Claims (Expected: 225k)
8:30am EST - US GDP QoQ Advance (Expected: 2.7%)
8:30am EST - US GDP Price Index (Expected: 2.5%)
8:30am EST - US Continued Jobless Claims (Expected: 1.91M)
4:00pm EST - Intel Q4 2024 Earnings
4:30pm EST - Apple Q1 2025 Earnings
Friday - 1/31/25
8:30am EST - US PCE Price Index YoY (Expected: 2.5%)
8:30am EST - US PCE Price Index MoM (Expected: 0.3%)
8:30am EST - US Core PCE Price Index YoY (Expected: 2.8%)
8:30am EST - US Core PCE Price Index MoM (Expected: 0.2%)
8:30am EST - US Consumer Spending MoM (Expected: 0.5%)
9:45am EST - US Chicago PMI (Expected: 40)
Prior Session Stats and Analysis - Friday, 1/24/25
Session Open: 22,044.25
Session High: 22,078.25
Session VAH: 22,050.00
Session POC: 21,988.75
Session VAL: 21,910.00
Session Low: 21,844.00
Session Close: 21,908.50
Session Settlement: 21,911.25
Session Range: 234.25 pts, 937 ticks
OI Change (Prelim): +2,191 (NQ) / +4,140 (MNQ)
Prior Session Analysis
It seems silly to review Friday’s session, given how much has changed over the weekend, but for the sake of consistency, here we go.
Friday’s session was between a Normal Variation day with range extension to the downside and a Double Distribution day. Typically, on a Double Distribution day, we see a longer, thinner middle area. But since we did spend the bulk of time in two distinct areas of the day’s range, the signature of a Double Distribution day is evident enough to acknowledge it.
Sellers were in control for most of the session, off the open until around 2pm. They auctioned price from above the prior session’s high to below the prior session’s low, eclipsing the entire range of Thursday’s session.
Thursday’s session low provided support and an area where buyers stepped in with strength, stopping the auction lower and taking control to auction price up into the close.
We saw a modest amount of new business enter NQ on Friday, increasing contracts by +2,191.
Plan for Today - Monday, 1/27/25
With the news of DeepSeek breaking over the weekend, we have seen the market react violently to the news, throwing into question all of the heavy investment by Big Tech and whether the US is actually leading in the AI race.
NVDA is down over 10% this morning, as is most Big Tech, which is bringing down the NQ futures and index (NDX).
What is notable about the Daily chart is that even with the risk-off sentiment prevailing, buyers have stepped in aggressively overnight to defend the area just below 21,000 down to 20,600. This has happened consistently since mid-November whenever price has entered that area. That indicates to me that this is a key price area for large participants in the market. This will be an important area to watch today after open; a break below this area could cause large participants to adjust their inventories, bringing more volatility and potential fuel to the selloff.
Anything could happen today; we could see a correction with price auctioning up, a continuation of price auctioning down, or another day where the most significant move was overnight, and we see a small range develop as the market rests and resets itself. Personally, my bias is bearish today, but I expect a fight below 21,000 if price auctions below it again in today’s session.
Obviously, we are opening way out-of-balance today from Friday’s session. When the market overreacts like this to news, experienced traders see opportunity but also risk. In the markets, opportunity and risk go hand in hand; you cannot have one without the other. Low opportunity has low risk; high opportunity has high risk.
My plan for today is:
If I see an opening range breakout to the downside with volume, I will take that trade.
If the OR breakout does not materialize off the open, look for a correction to the upside, but it will need to be strong and with volume for me to enter long with it. If it appears weak, I will be patient and wait for a potential resumption of selling at some point in the session.
Any short positions I put on will be exited below 21,000 at the first sign of consolidation or “stickiness,” given the consistent buying and support that area has provided over the past two months.
"The market can stay irrational longer than you can stay solvent." – John Maynard Keynes