Daily Brief - Thursday, 5/22/25
NQ slips as bond yields climb and tax bill headlines stir nerves. Eyes on 21,000 and the Senate—this rally is on slippery footing.
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.
Catch me on Twitter @TheShmuts during the day covering the session as it develops.
News Docket
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 - Wednesday, 5/21/25
Session Stats
Open: 21,278.75
High: 21,558.50
Low: 21,072.75
Close: 21,149.00
Settlement: 21,156.75
Range: 485.75 pts (1943 ticks)
Volume (Est.): 607,056
Open Interest (Prelim, NQM5): +565
Value Area (Market Profile)
Value Area High (VAH): 21,400.00
Point of Control (POC): 21,174.75
Value Area Low (VAL): 21,099.50
Prior Session Breakdown - Market Profile and NY Session
Market Profile View – 30-Min Chart
Yesterday’s session was a Neutral Extreme day with range extension to the downside, closing near the session low. The session was also an Outside Day, completely engulfing the prior session’s range. That said, trying to force a textbook label on it misses the mark — the session was a tale of two halves.
Off the open, buyers stepped in aggressively and filled the small overnight gap in the first five minutes. Price pushed higher with conviction, forming a textbook uptrend: thrust, consolidate, thrust. The morning session was strong, orderly, and bullish all the way up to ~21,530 — an area we’ve seen serve as resistance multiple times this month.
However, just before 1:00pm EST, the entire tone shifted.
News broke that 30-year bond yields had crossed above 5%, sparking a sharp reaction. NQ, along with the rest of the market, sold off violently. The auction down was fast and directional, with very little buying on the tape as sellers hammered the bid.
Price found temporary support just below the prior day’s low, and we entered a choppy but volatile consolidation around 1:30pm. A second strong leg down hit at 2:45pm and printed the low of the day at 21,076.00. We did see a small late-day bounce, but the close remained near the lows, suggesting bearish momentum could continue into today.
5-Minute Chart Breakdown – NY Session
On the 5-minute chart, the morning was structured and strong. The auction filled the gap immediately and continued upward with clear intent. As noted above, price stalled at 21,530 — the same zone Monday’s session failed at.
Once the bond yield headlines hit, the tempo and character of the session changed dramatically. The tape turned red, volume surged, and we saw what looked like a classic long liquidation. Sellers had full control from 1pm to the close, with only a small reprieve before the final thrust down.
Despite the volatility, Open Interest was up slightly, suggesting some new short interest may have replaced exiting longs. ES saw a more substantial increase in OI (+17k), which aligns with broader market participation and directional selling pressure.
Volume & Participation
Open Interest: +565 — small increase, likely new shorts replacing liquidated longs
Volume: ~607k — highest since May 13th, showing strong reactive selling
Range: 486 points — largest in over a week, driven by macro news
Final Thoughts
This was a news-driven liquidation event sparked by rising bond yields. The market wasn’t pricing in a breakout — it was reacting to a macro shift. What’s notable is that we didn’t see a full collapse — structure held just above key support, and we closed inside the extended range rather than well below it.
Until proven otherwise, this appears to be a corrective move inside an uptrend, triggered by short-term headline pressure. If that’s the case, we’ll be watching closely to see if bulls defend the 21,000 → 20,960 zone today. A failure there could accelerate downside, while strong defense may open the door for stabilization or recovery.
Today’s Analysis – Thursday, 5/22/25
Market Context
At the time of this writing, overnight inventory is short for the second straight session, with price trading ~100 points below yesterday’s settlement and about 20 points below the prior range. We’re currently set to open out-of-balance to the downside, but it’s still close enough to auction back into range before the bell. Even if that happens, we’d still be opening near the bottom of yesterday’s range — a spot that calls for caution and responsiveness.
The real driver here is the bond market. Yields surged yesterday in reaction to Trump’s “big, beautiful” tax bill — much like they did when tariff talk first ramped up. That bond market reaction was violent enough to spark a selloff in equities, and unless something changes in Washington, it’s likely to continue. The House passed the bill late yesterday; it now heads to the Senate this morning.
What we’re seeing right now isn’t just about the Moody’s downgrade — that was largely expected. The bigger issue is that lawmakers are actively validating the concerns behind all three credit rating downgrades. The bond market is voting, and right now, it’s not voting in favor of continued spending and adding to the national deficit.
As has been the case since January, headline risk is the engine behind these moves. Today, all eyes will be on the Senate and how the bond market reacts as the day unfolds. If the tax bill clears the Senate or gains momentum, expect continued upward pressure on yields — and potential downward pressure on equities.
Bias & Mindset
Bias: Neutral → Bearish
We have some data on deck this morning: jobless claims, PMI, and housing starts — all of which can bring short-term volatility. A bullish surprise might give the market a temporary lift, but I’d expect any strength to be sold if bond yields remain elevated or climb further.
Yesterday was an Outside Day with a broad range. It’s not uncommon to see a contracting range day follow — a quieter, more balanced session as the market digests macro developments. That said, if bond yields keep climbing, don’t expect the market to stay quiet.
The bond market has become the leading indicator. That’s where I’ll be looking for clues on direction today.
Key Levels I’m Watching Today
Upside:
21,515 – Pivot high from yesterday’s selloff; just below the resistance zone that’s capped price all week
21,400 — Yesterday’s VAH
21,240 — Area of overnight low
21,156 – Yesterday’s settlement
21,072 – Yesterday’s low; reclaiming this would suggest buyers may still be interested in defending prior value
Downside:
21,000 → 21,960 – Former breakout zone; a key structural support area
20,910 – High-volume congestion from May 12
Final Note on Today
This is a critical session for the rally off the tariff selloff lows. If the bond market keeps selling and yields keep climbing, this market could quickly lose its footing. If we start to see stabilization in yields, the bulls may have room to try again.
But for today — the theme is caution, patience, and eyes on rates.
The bond market voted yesterday. Let’s see if anyone in D.C. was listening.
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