Daily Analysis - Wednesday, 2/5/25
NQ did not see new business yesterday to add fuel to the upward momentum. After yesterday's bell, Alphabet and AMD's disappointing earnings are further weighing on NQ this morning.
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 - 2/5/25
8:15am EST - US ADP Employment Change (Expected: 150k)
8:30am EST - US Trade Balance (Expected: -96.75B)
9:45am EST - US S&P Services PMI Final (Expected: 52.8)
10:00am EST - US ISM Services PMI (Expected: 54.1)
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 - Tuesday, 2/4/25
Session Open: 21,421.25
Session High: 21,694.00
Session VAH: 21,681.50
Session POC: 21,638.75
Session VAL: 21,595.00
Session Low: 21,405.25
Session Close: 21,668.25
Session Settlement: 21,670.25
Session Range: 288.75 pts, 1155 ticks
OI Change (Prelim): -343 (NQ) / +974 (MNQ)
Prior Session Analysis
Yesterday’s session was largely a Neutral day with slight extension to the upside, some would say a Normal Variation day. We had a really large Initial Balance and price mostly stayed inside of that during the session with only a brief break above which is why to me it was a Neutral day.
Volume was lower yesterday than it has been the previous 5 sessions. I think this is largely due to the earnings after the bell by Alphabet & AMD combined with the market being on edge for any additional breaking news around tariffs.
Even with the move up yesterday, we saw a small amount of business leave NQ with -343 contracts lost. This appears to me to most likely be due to some shorts covering positions, which would drive price up. The lack of new longs during the move-up does make me question whether price will have any momentum for a further move upwards. Typically, when you sense shorts are covering, but new longs are not entering, the market auctions down once the covering is over.
Plan for Today - Wednesday, 2/5/25
At the time of this writing overnight inventory is short by approximately -140 points. ADP employment numbers came in high at 183k vs 150k expected, which is potentially bearish for the market although I am seeing a fairly muted response to the number.
NQ is currently below yesterday’s value area but still in-balance with yesterday’s range.
Given the lack of new longs entering during yesterday’s move up, and Alphabet and AMD disappointing with their earnings I have a bearish bias today. This, of course, could change at any moment if positive news breaks about tariffs with China.
To the upside, levels I will be watching are:
21,595 - yesterday’s value area low, if price auction back into yesterday’s value area that would be a positive sign.
21,681 - yesterday’s value area high
To the downside, levels I will be watching are:
21,405 - yesterday’s low, a break below this would indicate potential further downside momentum
21,340 - area of support during Monday’s session and near its value area low.
"A difficult challenge for short-term traders is that when you become part of a group there is a tendency to become like them. Remember, all the anecdotal evidence suggests that less than 10% of the group is profitable. Our surroundings influence us.“ – Shane Parrish, Clear Thinking