Daily Analysis - Thursday, 2/6/25
NQ is nearing the top of its range without volume or new business behind it. Will it reject and head lower in upcoming sessions, or can something emerge to give it momentum?
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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.
Upcoming News
Today - Thursday - 2/6/25
8:30am EST - US Initial Jobless Claims (Expected: 212.5k)
4:00pm EST - Amazon Q4 2024 Earnings
Friday - 2/7/25
8:30am EST - US Unemployment Rate (Expected: 4.1%)
8:30am EST - US Nonfarm Payrolls (Expected: 170k)
8:30am EST - US Average Earnings YoY (Expected: 3.8%)
10:00am EST - University Michigan Sentiment Prelim (Expected: 72)
Prior Session Stats and Analysis - Wednesday, 2/5/25
Session Open: 21,551.00
Session High: 21,787.50
Session VAH: 21,770.00
Session POC: 21,707.75
Session VAL: 21,612.50
Session Low: 21,501.00
Session Close: 21,761.25
Session Settlement: 21,763.00
Session Range: 286.5 pts, 1146 ticks
OI Change (Prelim): +1,786 (NQ) / +2,176 (MNQ)
Prior Session Analysis
Yesterday’s session was a Normal Variation day to the upside. Most of the time spent was above the prior session’s high indicating participants viewed NQ’s value as being higher than the previous session. This was a surprise to me given the disappointing Alphabet and AMD earnings the evening before.
Off the open, and for the first two hours of the session, price action was messy. The prior session’s value area low served as significant resistance multiple times against any upward price pressure during this period of consolidation.
Around 11:30 am, after an initial move up into the value area and then subsequent rejection, bullish participants entered with conviction and auctioned price up through the prior session’s value area and above the prior session’s high in the span of 30 minutes. This was the best move of the day if traders were able to catch it.
Once price auctioned above the prior session’s high, that high served as support multiple times as price settled into a range for the remainder of the session before a late spike to the upside into close. A late spike like this can often signal continuation into the next session.
During yesterday’s session we did see a modest amount of new business enter NQ with the addition of +1,786 contracts.
Volume was roughly the same as Tuesday’s session, which was significantly lower than the prior six sessions from Jan 27th through Feb 3rd.
I note these two data points because for trends to continue they need new business and volume, the absence of either or both can be an indication the trend will die. We have had a relief rally the prior three sessions in NQ but the last two have been on much lower volume without substantial new business. That makes me question how likely it is that this rally will continue.
Plan for Today - Thursday, 2/6/25
At the time of this writing overnight inventory is flat, right at yesterday’s settlement price of 21,763.
Yesterday’s settlement price and value area high have both acted as support and resistance during the overnight session. Depending on where we open, these could be levels to watch for support or resistance during the regular session.
I have a neutral bias today, I think there’s an equal chance of the market trending in either direction. We have Amazon earnings after the bell today and we are always one Trump tweet or White House press conference away from heading in either direction.
On higher timeframes, NQ is range bound and getting up near the top of the range which is roughly around 22,000. This trend back to the top of the range has been on lower volume and business, NQ has lost roughly 9k contracts since Jan 27th when the DeepSeek news hit the markets. In a range bound market, as price nears the top of the range, without volume or new business there’s a much greater chance than not that price will reject and head back to the bottom of the range. Without a macro catalyst emerging that changes sentiment, I believe we will see that happen in NQ sometime in the coming sessions.
Overall, earnings season has been disappointing so far for AI related equities. This includes companies who have invested heavily in AI such as Alphabet and chip makers such as AMD, ARM, and others. This, along with the DeepSeek news is adding to the bearish case and a lack of enthusiasm in tech.
Levels to watch today from top to bottom:
21,906 - pivot point from tariff news last Friday the 31st. There is room to run up to this area if price can break above the overnight high and catch some momentum. Taking this out would be a strong indication the market is feeling better about tariffs being delayed.
21,830 - area of overnight high and resistance on three occasions during the overnight session.
21,787 - yesterday’s high, really hasn’t come into play during the overnight session as price has auctioned freely through it but often during the NY session this is a level that comes into play.
21,770 to 21,763 - this an area between yesterday’s value are high and settlement price. This area has been a key area during the overnight session serving as both support and resistance on multiple occasions.
21,710 - area of the overnight low. Price rejected strongly off this level to head higher a little after 7am.
21,690 - this was a key area of support in yesterday’s session after the drive up around 11:30am.
21,612.50 - yesterday’s value area low. I think it would take the emergence of news or a catalyst to get down here but anything is possible. A break below this would indicate sentiment has changed to fair value being much lower than yesterday’s session.
“The game taught me the game. And it didn’t spare me the rod while teaching.”
– Jesse Livermore