Daily Brief - Monday, 2/24/25
So much for making a run at all-time highs; there was blood in the streets on Friday. NVDA's earnings loom large over the market. Behind that are jobs, housing, and inflation data later in the week.
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.
TLDR:
Friday’s selloff was attributed not just to UMich sentiment and forward looking inflation numbers but also Opex had a key role to play.
NVDA’s earnings after the close on Wednesday will cast a shadow on the market early in the week. We also have home sales, job numbers, and PCE data later in the week. PCE is the Fed’s preferred inflation reading. It will be a fairly heavy news week in the last half.
Tariff news has begun to fatigue the market; I expect to see the market react less to “threats” of tariffs at this point and only react when tariff actions are concrete. The market adapts fairly quickly.
Volatility triggers were broken on Friday and the market is in a negative gamma situation which will accelerate any moves until we get back to a safe area.
The plan for today is to be patient and wait for a clear indication of direction and better trade locations as the session progresses.
Upcoming News
Tuesday - 2/25/25
10:00am EST - US CB Consumer Confidence (Expected: 102.8)
Wednesday - 2/26/25
10:00am EST - US New Home Sales - Units (Expected: 0.675M)
4:05pm EST - NVDA Earnings
Thursday - 2/27/25
8:30am EST - US Initial Jobless Claims (Expected: 222k)
8:30am EST - US GDP QoQ 2nd Estimate (Expected: 2.3%)
8:30am EST - US Durable Goods (Expected: 2%)
Friday - 2/28/25
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: 2.6%)
8:30am EST - US Core PCE Price Index MoM (Expected: 0.3%)
8:30am EST - US Consumer Spending MoM (Expected: 0.2%)
Prior Session Stats and Analysis - Friday, 2/21/25
Session Open: 22,186.25
Session High: 22,188.00
Session VAH: 22,140.00
Session POC: 21,997.25
Session VAL: 21,765.00
Session Low: 21,662.50
Session Close: 21,682.50
Session Settlement: 21,679.25
Session Range: 525.5 pts, 2102 ticks
OI Change (Prelim): -9,507 (NQ)
Est Volume: 700,723
Prior Session Analysis
Friday’s session was a Trend day; sellers were in control from the open until roughly 2:30pm when NQ found a bottom and leveled off into the close. The session was a momentum trader’s dream day. These days don’t happen very often, but when they do, it’s key to capitalize on them.
90% of successful intraday traders go with trends, not against them. I saw several posts on various social media platforms this weekend about traders blowing their accounts on Friday by trying to mean revert the trend. If you want to last in this game, don’t do this.
There was a lot of focus on the UMich sentiment and long-term inflation forecast as the catalyst for the selloff on Friday. While that did play a part, Opex on Friday also influenced this selloff. When that much capital rolls off the market, it brings tremendous selling pressure with it.
If you read my Brief on Friday, I posted that I saw the Daily chart as being very bullish combined with the increase in new business we had seen in NQ for six straight sessions. That belief ended quickly and I pivoted to trading what the market was doing not trying to force my bias to be right. As a trader it’s ok to have strong opinions but they have to be loosely held.
We did see a fairly significant loss in business on Friday in NQ with -9,507 contracts closed during the selloff. This was more than likely long liquidation. Volume was very high on Friday with over 700k contracts traded.
Plan for Today - Monday, 2/24/25
At the time of this writing, overnight inventory is long by about 100 points above Friday’s close. Price action has been fairly flat through the overnight session with the overnight high around 21,815 and the low around 21,700.
Friday’s session range is very large, we are well within range and balance at this time. A drop below 21,682.50 by open would have us opening out-of-balance to the downside but as of right now it appears we will open in-balance from Friday’s session.
The plan for today is to be patient and wait for good trade opportunities. I personally will be waiting for an indication of direction before jumping into any trades.
Levels I have marked:
22,000 - this was another battle area on Friday during the selloff. Buyers briefly tried to auction price back above before ultimately capitulating and sellers took back control to auction price further down.
21,810 - overnight high, if price auctions above this it has quite a bit of room to run to the 21,900 area.
21,670 - this area provided support in Friday’s session, the selloff bottomed out here around 2:30pm and leveled off.
The market is fragile following a significant selloff as volatility triggers are often broken, and the market enters a negative gamma situation. It is common to see a recovery after a significant selloff, but anything can happen. If price does auction further down today, there is room to drop between 21,670 down to 21,500.
Be patient today, trade with trends, use stop losses, and don’t let your emotions take over. Trade what is in on the chart.