Daily Brief - Monday, 5/19/25
AA1 and Done? Downgrade Sparks First Real Test for the Rally
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.
News Docket
This week has a very light economic calendar but there is a barrage of Fed speakers throughout the week. Tuesday, 5/20 is the heaviest day with 6 Fed governors set to speak at various times.
Monday - 5/19/25
10:00am EST - Trump/Putin Phone Call
Thursday - 5/22/25
8:30am EST - US Initial Jobless Claims (Expected: 230k)
9:45am EST - US S&P Services PMI Flash (Expected: 51)
9:45am EST - US S&P Manufacturing PMI Flash (Expected: 49.9)
10:00am EST - US Existing Home Sales (Expected: 4.1M)
Prior Session Stats & Analysis - Friday, 5/16/25
Session Stats
Open: 21,467.50
High: 21,512.00
Low: 21,320.25
Close: 21,505.75
Settlement: 21,506.00
Range: 191.75 pts (767 ticks)
Volume (Est.): 420,847
Open Interest (Prelim, NQM5): -2,438
Value Area (Market Profile)
Value Area High (VAH): 21,500.00
Point of Control (POC): 21,425.25
Value Area Low (VAL): 21,400.25
Market Profile View – 30-Min Chart
Friday was a Neutral Extreme Day, with range extension on both sides of the IB and a close at the upper end of the session’s range — typically a bullish signal.
Value area and POC rotated upward, though with overlap from Thursday’s session
This showed some continuation, but not a strong migration of fair value
The day’s range was tight, and the climb upward was slow and steady, not aggressive
The first three TPOs showed early selling pressure, but buyers stepped in decisively below 21,390, reversing momentum and establishing the low of the day. From there, price climbed methodically to the close.
Despite the uptrend:
Volume was the lowest since May 5th
Open interest dropped for the second session in a row
No excess at either end of the profile
Even with the rotation higher of value and POC, Friday’s session high was lower than the prior session’s high.
This wasn’t a conviction move — it was more of a controlled float upward as sellers backed off.
5-Minute Chart Breakdown – NY Session
The lower timeframe chart paints a more nuanced picture than the profile:
Buyers were active off the open, holding price in a sideways range during the first hour
Then they appeared to step aside briefly, allowing sellers to push price lower — only to re-enter aggressively and take control around the third TPO
From there, it was a slow, low-volume grind higher
VWAP came into play during the session:
After price auctioned above it, VWAP acted as support several times
It remained flat, which reflects the light volume during the trend
Sellers were essentially absent after the first hour, and buyers coasted into the close. Despite the Neutral label, it was a session split into two halves — the morning belonged to sellers, the rest to buyers.
One additional note:
I saw very few large (75+ lot) orders on the tape — a sign that institutional participation was minimal on Friday.
Volume & Participation
Open Interest: -2,438 — second straight session of business being pulled
Volume: ~420k — lowest in 9 sessions
Range: 192 points — narrow range, limited profit potential
Final Thoughts
Friday’s session offered one early reversal trade and not much else. If you caught that, great. Otherwise, it was a day for protecting capital and respecting market conditions.
The drift higher was passive, not aggressive.
Volume was low. Large players sat out.
Price moved up, but structure didn’t say much.
Heading into OPEX expiration and a new week, the two-day decline in OI and muted participation are worth watching.
Pre-Market Plan – Monday, 5/19/25
Market Context
As of this writing, overnight inventory is significantly short, with NQ trading ~330 points below Friday’s settlement and ~140 points below Friday’s range. We’re set to open out-of-balance with a sizeable gap to the downside.
What triggered the move?
Moody’s downgraded the U.S. credit rating from AAA to AA1 late Friday — the last major credit agency to do so.
Because the news broke after the bell, the market didn’t get a chance to respond until futures opened last night, and the response was clear: a fast, persistent selloff that continued through the overnight session.
This downgrade may explain the two-session decline in open interest late last week — it now looks like some traders were front-running the headline, especially as Bloomberg had hinted at it throughout the week.
Bigger picture:
Even before the downgrade, momentum in the rally had been weakening:
Value areas were overlapping, not migrating cleanly
Volume was trending lower
Open interest was leaking, not building
And price action showed diminishing return on new highs
In short, the market was trying to go up, but doing it worse.
This downgrade could either be a catalyst to finally knock the legs out from under the rally, or just a short-term shock the market absorbs. Either way, structure has already been fragile, and that’s critical context for today’s action.
Looking ahead, we have a quiet week in economic releases, but a heavy schedule of Fed speakers. And as always, headline risk remains elevated on both sides.
Bias & Mindset
Bias: Neutral → Bearish
We’re opening well below Friday’s range, so I’ll be watching closely to see whether:
The market tries to rebalance, or
Sellers hit with conviction and continue driving price lower off the open
My Plan:
If we open and trend lower, I’ll look for ORB trades or failed gap fills to the short side
If we fill the gap and move back into Friday’s tight range, I’ll shift to patience mode
A full gap fill puts us back into potential chop/slop territory, which I won’t trade
The structure today offers clear edges, but only if the market confirms conviction. No guesswork.
Key Levels I’m Watching Today
Upside:
21,525 — Friday’s weak high; not likely to come into play today, but still a reference
21,320 — Thursday S/R, overnight low, and May 13th high-volume node
21,200 — Former support overnight and Thursday; now acting as resistance pre-market
Downside:
21,000 → 20,960 — Previous breakout zone; could act as first support test
20,910 — High-volume congestion from May 12
20,800 → 20,765 — Lower volume shelf and balance area from May 12
Final Note on Today
The market came into this week tired, thinning, and vulnerable — and Moody’s may have just provided the trigger it needed.
If sellers show up early, I’ll look to go with them. If the market stabilizes, I’ll stay nimble and let structure lead.
Either way, it’s not the kind of day to impose your will — wait for confirmation and act with precision.
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