Daily Brief - Monday, 8/4/25
Market Wakes Up from Zombie Mode; Critical Range Test Awaits
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
Monday - 8/4/25
10:00am EST - US Factory Orders (Expected: -5%)
Tuesday - 8/5/25
8:30am EST - US Trade Balance (Expected: -62B)
9:45am EST - US S&P Services PMI Final (Expected: —)
10:00am EST - US ISM Services PMI (Expected: 51.5)
4:00pm EST - AMD Q2 2025 Earnings (Call @ 5:00pm EST)
Thursday - 8/7/25
8:30am EST - US Initial Jobless Claims (Expected: 222.5k)
Friday - 8/8/25
US’s Russia/Ukraine Deadline
Prior Session Analysis - Friday, 8/1/25
Session Stats
Open: 23,087.50
High: 23,095.75
Low: 22,775.00
Close: 22,880.50
Settlement: 22,883.75
Range: 320.75 points / 1,283 ticks
Volume: 805,777
Open Interest Change: -7,163 (NQU5)
Value Area (Market Profile)
Value Area High (VAH): 22,960.00
Point of Control (POC): 22,895.00
Value Area Low (VAL): 22,830.00
Prior Session Breakdown - Market Profile and NY Session
Friday was one of those days that will be talked about for a while—and not for good reasons if you were long. The session opened with a brutal 213-point gap to the downside at 23,087, and there was absolutely no attempt to fill that gap. Sellers were in complete control from the opening bell, and they had one mission: exit their long positions.
The most telling part of the whole session was how easily price sliced through 23,000 like it wasn't even there. No pause, no bounce, no "hmm, maybe we should test this level"—just straight through. It wasn't until we hit 22,800 exactly to the tick (the bottom of that July range we'd been watching) that buyers finally showed up to the party.
The session developed into a normal day with a wide initial balance of 295 points, but the character was unmistakably imbalanced with a classic "b"-shaped profile. This is textbook long liquidation territory—high volume, wide range, and sellers clearly in control. What's interesting is that price never actually moved outside that initial balance despite all the drama, which suggests the market was working through a major repricing rather than just panicking.
Bulls tried to mount a comeback during the middle of the session, and for a hot minute it looked like they might actually pull it off. But that recovery ran smack into resistance right at the overnight low of 23,031, and sellers immediately stepped back in. It was like watching someone try to swim upstream in a raging river—the current was just too strong.
The value area settled between 22,830 and 22,960 with the POC at 22,895—all significantly lower than anything we'd seen in weeks. This represents a complete reset of where the market thinks fair value should be, and it's not pretty for anyone who was betting on higher prices.
The tight value area range tells us that once the initial selling wave passed, there was actually decent agreement about pricing in this lower range. The POC sitting right in the middle suggests balanced conditions once the dust settled, which is somewhat encouraging for stability going forward.
Volume & Participation
Total Volume: 805,777 – highest session volume since well before June, confirming this was a major institutional event
Open Interest: -7,163 contracts (NQU5) – significant outflow indicating substantial long liquidation
Price Range: 320.75 points / 1,283 ticks – larger than normal range reflecting the volatile nature of the session
The combination of record volume with substantial open interest decrease paints a clear picture: this was a major liquidation event. The jobs report, tariff deadline reality, and corrections to previous employment data all combined to paint a picture that had institutions heading for the exits.
Final Thoughts
Friday felt like the market finally "woke up" from what had been a zombie-like march higher for the past month. The selloff had real conviction behind it, but importantly, it found support right where it should have—at the bottom of that July range.
The good news is that this looked more like long liquidation than the start of something more sinister. The underlying structural flows aren't showing the same warning signs we saw in earlier selloffs this year, which suggests this might be temporary turbulence rather than the beginning of a major correction. The headlines and large amount of earnings reports this week will have a major impact on what happens.
Today’s Analysis – Monday, 8/4/25
Market Context
Well, well, well—look who decided to show up to work this morning. The NQ is trading at 23,058, about 175 points above Friday's settlement, which puts us right back near the top of Friday's range. The overnight range between 23,078 and 22,821.75 has been pretty well-contained, but we're definitely sitting in a spot where we could easily gap out-of-balance by the 9:30 AM open.
The VIX has backed off from Friday's high of 21.90 down to around 19.14 as I write this, which is a decent sign that some of the fear has dissipated over the weekend. But we're definitely not back in that sleepy, low-volatility environment that carried us higher for most of July.
Here's the big picture: Friday's selloff knocked us right back into that July range between roughly 22,800 and 23,100, and we're now sitting right at the top of that range during the overnight session. This is classic make-or-break territory—either we bust out of this range and continue the recovery, or we fail here and potentially retest Friday's lows.
The regime has clearly shifted from the positive gamma environment that was suppressing volatility and supporting every dip. We're now in mixed gamma territory, which means dealer behavior is less predictable and big moves in either direction are more likely.
Bias & Mindset
Longer Term Bias: Bullish
Today’s Bias: Neutral
I'm staying neutral with low confidence because Friday's long liquidation pattern typically indicates a pause rather than the beginning of a massive selloff. The overnight recovery is promising, and the fact that we held support exactly at that July range bottom suggests there are still some buyers willing to step in at the right levels.
But here's the thing—we're right back at that critical 23,100 level, and how the market handles this area will tell us everything we need to know about whether Friday was just a reset or the start of something bigger. If we can break above and find acceptance, we might see some real recovery. If we fail here, those Friday lows are definitely back in play.
The mixed gamma environment means we can't just assume dips will be bought like we've been doing for weeks. This market has "woken up" from its zombie-like march higher, and that means increased volatility and less predictable behavior.
I’m not seeing the structural outflows that indicate panic like I saw in selloffs earlier in the year. That gives me the confidence right now to assume a longer term bullish sentiment until the data indicates otherwise.
Key Levels I’m Watching Today
Upside:
23,350 — Friday's pivot point, retaking this would suggest Friday's issues are behind us
23,160 — Area where price paused on Friday's way down and where selling pressure increased on recovery attempts
23,100 — Critical level. Breaking above and accepting here would be a major bullish signal and get us out of that longer timeframe range from earlier in July.
Downside:
22,960 — Friday's VAH, breaking below indicates we're searching for fair value in Friday's range
22,830 — Friday's VAL and near the bottom of that July range, critical support
22,775 — Friday's low, break below this and we could see a much bigger decline
Final Thoughts on Today
The key event today is US Factory Orders at 10:00 AM, which could give us some insight into whether tariffs are actually having any impact on domestic manufacturing. But honestly, the technical setup is probably more important than the data at this point.
We're getting a real-time lesson in regime change. That "zombie market" that just kept marching higher without caring about fundamentals is gone, replaced by something more volatile and unpredictable. The good news for bulls is that I'm not seeing the same underlying structural weakness that characterized the bigger selloffs earlier this year.
Friday's action looked more like a necessary reset than the beginning of a major correction. But the market will need to prove that by actually holding these levels and potentially breaking back above that July range. Today's open and how we handle that 23,100 level will be critical in determining whether we're looking at recovery or retest.
Stay patient unless we see a big move off the open—in this environment, anything could happen, and headline sensitivity remains elevated. The zombie market is dead; viva la volatility!
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