Daily Analysis - Wednesday, 1/22/25
NQ's rally continues to show strength. Is yesterday's slight loss in business a sign that this rally may encounter headwinds, or does the significant overnight move indicate more strength today?
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.
Question for Readers
I’m considering doing my analysis in a video each day, but I wanted to put up a small poll to see if there’s interest in that. If you could take a second to answer, I would really appreciate it.
The Week Ahead
It will be a light news week, with Friday bringing the bulk of the data releases. Since they are during regular trading hours, be sure to be aware of them, and it’s always recommended to be flat before they are released.
Thursday - 1/23/25
8:30am EST - US Initial Jobless Claims (Expected: 220k)
Friday - 1/24/25
9:45am EST - US S&P Services PMI Flash (Expected: 56.5)
9:45am EST - US S&P Manufacturing PMI Flash (Expected: 49.9)
10:00am EST - University Michigan Sentiment Final (Expected: 73.2)
10:00am EST - US Existing Home Sales (Expected: 4.2M)
Prior Session Stats and Analysis - Tuesday, 1/21/25
Session Open: 21,710.75
Session High: 21,783.50
Session VAH: 21,781.25
Session POC: 21,728.25
Session VAL: 21,653.50
Session Low: 21,525.75
Session Close: 21,714.50
Session Settlement: 21,709.50
Session Range: 257.75 pts, 1031 ticks
OI Change (Prelim): -1,481 (NQ) / +4,108 (MNQ)
Prior Session Analysis
Yesterday’s session was a Normal Variation day with range extension to the upside after a moderate Initial Balance was set. We also saw an upside rotation in the value area from the prior session.
The session opened with a gap to the upside, however, just as we saw in Friday, 1/17’s session, participants auctioned price down off the open to close the gap.
Over the first two hours of the session, participants continuously rejected price auctioning lower than the prior session’s value area. I have the area highlighted on the chart above. This was an indication of bullish sentiment in yesterday’s session and participants believed that fair value was higher than the previous session.
The sellers eventually capitulated around 11:30am, buyers gained firm control and auctioned price up until hitting selling pressure in the area above 21,755 around 1pm. Price then settled into a range before buyers were able to put in the high of the day just after the 4pm close.
On the Daily chart, NQ is very close to putting in a new higher high, and the channel for the downtrend mentioned last week has been broken. NQ must close above 21,896.75 to put in a higher high officially.
The current rally started on Jan 15th, new business is fuel for trends, and one pessimistic piece of data is that yesterday we saw a loss in open interest for the first time in 7 days. It wasn’t a large amount at -1,481 contracts, but I would have liked to have seen another day of new business behind this trend.
Plan for Today - Wednesday, 1/22/25
At the time of this writing, overnight inventory is very long, over 210+ points (+1%) above yesterday’s close.
Assuming this continues, we will open out-of-balance with a large gap to the upside, so gap rules will be followed.
The previous two sessions have both opened with a gap to the upside, and in each, we have witnessed participants auctioning price down off the open before running into an area of support within the first 2 hours of the session. If the gap does attempt to close once again off the open, I will take a short but trail a stop around 20 points, tightening it closer if price action appears to be weakening.
An opening range breakout to the upside will also be a trade I will look for; for this trade, I will want to see strength and good momentum behind the move and watch for any possible rejection.
Below current price, the levels listed above will all be areas I will watch for support or a break down further.
Above current price: 22,000 is a psychological level, 22,075 is an area of potential resistance, and 22,290 is another area of potential resistance.
"The market doesn’t know you exist. You’re not entitled to anything. Accept what the market gives you." – Mark Douglas