Daily Analysis - Wednesday, 1/29/25
We saw a bit of a short squeeze yesterday. With a big news today can Powell and Big Tech add more fuel to the rally, or will they kill 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
Today - 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 - Tuesday, 1/28/25
Session Open: 21,302.75
Session High: 21,626.00
Session VAH: 21,630.00
Session POC: 21,551.50
Session VAL: 21,419.75
Session Low: 21,159.50
Session Close: 21,575.50
Session Settlement: 21,581.75
Session Range: 466.5 pts, 1866 ticks
OI Change (Prelim): -910 (NQ) / -1,212 (MNQ)
Prior Session Analysis
Yesterday’s session was a Normal Variation day with range extension to the upside.
There was quite a bit of selling pressure for the first 30 minutes of the session; buyers eventually took over, creating a single-print buying tail at the bottom of the range, and stayed in control for the rest of the session.
In yesterday’s analysis, I warned to be on the lookout for a short squeeze after such a significant move down. Given the loss in OI yesterday and the price action, I believe yesterday’s session was the squeeze I had predicted. I did expect it to be larger, but given the FOMC press conference and Big Tech earnings today, we may be seeing some shorts that are not ready to close yet, anticipating another move down.
Regarding trading opportunities yesterday, there were plenty for momentum-based trend traders. It was not a violent straight move up, there were plenty of pullbacks to the mean that presented opportunities for good entries if the trader believed the trend would sustain.
Plan for Today - Wednesday, 1/29/25
At the time of this writing, overnight inventory is flat and has been during the entire session. We will open in-balance from yesterday’s session.
It is a big news day today: Fed rate cut announcement at 2pm EST, Fed press conference with Powell at 2:30pm EST, and MSFT, META, and TSLA earnings after the bell. I don’t expect that we will see significant price action movement before 2pm. I plan to hold off on trades today until the press conference. A couple of notes about each of these news events:
2pm Rate Cut Announcement - this is the most predictable “no rate cut” in recent memory. As I showed yesterday in my analysis, traders have the odds of no rate cut at 99.5%. Obviously any surprise here would shock the market but I am not expecting it.
2:30pm Press Conference - the market will be watching Powell’s comments closely. What will be important is his tone, whether hawkish or dovish and any indications he gives in his comments about the possibility of a rate cut in March. Without a rate cut in March, May would be the next Fed meeting and another chance at a rate cut. I feel that June or July is the most realistic chance at another rate cut, but there is a lot of data to come out between now and then to skew the odds for or against it during that time. Given the strong economy and sticky inflation, I don’t see the Fed as being in a hurry to cut rates this year, especially given the current uncertainty around the Trump administration’s tariff plans.
After the bell, Big Tech earnings - equities, especially the Mag7, are all priced for perfection. To impress the market, they have to be perfect. In the last earnings season, we saw one Mag7 equity after another selloff, even though they reported good earnings. Earnings growth has been slowing among most of the Mag7 over the last 3 quarters, with this quarter estimated to be the most significant slowdown, at 22%. I believe most of the risk here is to the downside with these earnings announcements, and none of the Mag7 are immune to it, even the mighty NVDA, which always announces later in the season.
An interesting note from Monday I forgot to mention in yesterday’s analysis: while AI and Mag7 stocks were taking a beating during Monday’s session, there were more gainers than losers during that session in the S&P 500 index. This showed that besides the movement of money into treasuries, money was also moving into other equities outside of chips and tech, which broadens the base of strength in the S&P. This isn’t a great thing for the NQ, but it is a good thing the market as a whole. The wider the base of strength in any index, the more resilient it becomes to shocks that appear, such as the DeepSeek news. It will bear watching if this trend continues or was just a hedging move during that tumultuous day.
Plan for today: Sit on my hands this morning, trade the press conference at 2:30pm with Powell, and be flat by the end of the day before the earnings announcements. If a significant opportunity shows itself after the 6pm open, I may look for a trade during the overnight session. Readers of this blog know that I rarely trade the overnight session, but given the situation, a good trade opportunity may present itself.
"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria." – Sir John Templeton