Daily Brief - Wednesday, 7/16/25
NQ Discovers Inflation Still Exists, Loses Breakout Momentum
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
Wednesday - 7/16/25
8:30am EST - US PPI YoY (Expected: 2.5%)
8:30am EST - US PPI MoM (Expected: 0.2%)
8:30am EST - US Core PPI YoY (Expected: 2.7%)
8:30am EST - US Core PPI MoM (Expected: 0.2%)
9:15am EST - US Industrial Production MoM (Expected: 0.1%)
Thursday - 7/17/25
8:30am EST - US Retail Sales MoM (Expected: 0.1%)
8:30am EST - US Initial Jobless Claims (Expected: 234k)
Friday - 7/18/25
July OPEX
8:30am EST - US Housing Starts (Expected: 1.298M)
10:00am EST - University Michigan Sentiment Prelim (Expected: 61.5)
Prior Session Analysis - Tuesday, 7/15/25
Session Stats
Open: 23,200.25
High: 23,222.75
Low: 23,019.25
Close: 23,052.25
Settlement: 23,056.75
Range: 203.50 points / 814 ticks
Volume: 525,104
Open Interest Change: -4,036 (NQU5)
Value Area (Market Profile)
Value Area High (VAH): 23,180.00
Point of Control (POC): 23,165.00
Value Area Low (VAL): 23,110.00
Prior Session Breakdown - Market Profile and NY Session
Tuesday's session delivered a sobering reminder that even the most compelling overnight breakouts can quickly lose their luster when fundamentals shift. What began as a dramatic gap opening at 23,200.25—driven by Monday night's NVIDIA news—devolved into a grinding, choppy session that ultimately closed the gap with just one minute remaining in regular trading hours.
The session developed into a normal variation day with a "D"-shaped profile, characterized by sideways action with a persistent downside tilt. The biggest move of the day had already occurred in the overnight session, leaving regular trading hours to deal with the aftermath of slightly hot CPI data that gave participants pause about their aggressive long positioning. Price made two separate attempts to dip below the initial balance, recovering each time, but on the third attempt the market finally succumbed to selling pressure.
The late-day spike at 3:59 PM was particularly telling, as it represented the market's ultimate rejection of the overnight gap and a return to the established range structure. This final move below 23,080—a level that had provided support twice during the session—confirmed that the breakout attempt had failed and fair value remained anchored closer to the previous week's value.
Value area parameters settled in the upper portion of the session's range, with VAH at 23,180.00, POC at 23,165.00, and VAL at 23,110.00. The positioning of these levels reveals important information about participant behavior: while the market spent the majority of the session above the critical 23,100 level, the concentration of activity in the 23,110-23,180 zone suggests this was more of a distribution area than genuine acceptance of higher fair value.
The fact that value area remained elevated despite the session's ultimate failure speaks to the market's attempt to find equilibrium at higher levels—an attempt that was ultimately rejected by the combination of inflation concerns and profit-taking pressure.
Volume & Participation
Total Volume: 525,104 – highest since July 7th, reflecting increased urgency in inventory adjustments
Open Interest: -4,036 contracts (NQU5) – substantial outflow indicating likely some long liquidation following CPI data
Price Range: 203.50 points / 814 ticks – compressed range despite the overnight gap, typical of distribution days
The volume surge combined with the significant open interest decrease tells a clear story: participants used the overnight gap as an opportunity to reduce long exposure rather than add to positions. This behavior is classic following economic data that challenges the prevailing narrative, as traders reassess their risk exposure in light of new information.
Final Thoughts
Tuesday's session was a lesson in how quickly market sentiment can shift when fundamentals challenge technical breakouts. The failure to maintain the overnight gap, combined with the substantial long liquidation evidenced by the open interest decrease, suggests the market's recent bullish positioning may have been overdone. The late-day gap fill was particularly significant, as it represented a complete rejection of the NVIDIA-driven optimism that had carried the market to new highs.
The session's choppy, range-bound character with limited trading opportunities reflected a market in transition, caught between the technical breakout impulse and fundamental concerns about signals of increasing inflation. This type of environment often precedes more decisive directional moves once clarity emerges.
Today’s Analysis – Wednesday, 7/16/25
Market Context
NQ is positioned for another out-of-balance opening, this time to the downside, currently trading at 23,011.00, approximately 45 points below yesterday's settlement. The overnight range between 23,045.00 and 22,930.00 has kept price firmly below the critical 23,100 level that defined the upper boundary of the previous range structure. This positioning confirms that yesterday's late-day rejection has carried through the overnight session.
The catalyst for continued weakness stems from yesterday's slightly hot CPI data, which has prompted participants to reassess their aggressive long positioning that was evident in recent sessions. The market's inability to recover the 23,100 level overnight, combined with the substantial open interest decrease yesterday, suggests the recent bullish momentum may be stalling as inflation concerns resurface.
We remain in a positive gamma environment where dealer behavior typically supports dips, but the headline sensitivity has clearly increased following yesterday's inflation data. This morning's PPI release at 8:30 AM will be crucial in determining whether yesterday's inflation concerns are reinforced or if the market receives relief that could spark a recovery attempt.
Bias & Mindset
Bias: Neutral
I'm adopting a neutral bias with low confidence, reflecting the market's current state of uncertainty following yesterday's failed breakout attempt. The key technical level of 23,100—which represented the upper boundary of the previous range—has now become a critical resistance level that the market must reclaim to restore bullish momentum.
Yesterday's session demonstrated that it was indeed crucial for price to find acceptance above 23,100 to validate the breakout, and the failure to maintain that level, combined with the open interest decrease, suggests participants are adopting a more cautious stance. The overnight action, which has kept price below this critical level, reinforces the need for caution in assuming any directional bias.
Today's PPI data will likely be the determining factor in whether we see continued weakness or a recovery attempt. If the data reinforces yesterday's inflation concerns, another pullback day seems likely. Conversely, if PPI provides relief on the inflation front, we may see renewed buying interest.
Key Levels I’m Watching Today
Upside:
23,180.00 — Area of resistance from yesterday's session
23,100.00 — Critical range breakout level, recovery above would be very bullish
23,019.25 — Yesterday's low, break above could indicate fair value recovering to yesterday's levels
Downside:
22,972.00 — High volume node from July 11th session
22,860.00-22,840.00 — Area of lows from July 11th and 14th sessions
22,785.00 — Area of strong buy-side reversal from July 7th
Final Thoughts on Today
Today represents a critical test of whether the market can stabilize following yesterday's failed breakout attempt or if we're entering a more significant corrective phase. The overnight action, which has kept price below the crucial 23,100 level, suggests participants remain cautious about re-engaging on the long side without clearer fundamental support.
The PPI data at 8:30 AM will be the primary catalyst for determining direction, as it will either reinforce yesterday's inflation concerns or provide relief that could spark a recovery attempt. Given the current challenging trading environment and the market's tendency to remain range-bound, patience will be key. Watch for momentum in either direction and whether NQ can reclaim the 23,100 level or if it settles back into the established range structure that had contained recent price action. The market's response to today's data will be crucial in determining whether the recent bullish momentum can be restored or if a more significant consolidation phase is beginning.
Enjoying The Shmuts? Help Me Spread the Word
If you’ve been finding value in the Daily Brief or other posts, I’d be incredibly grateful if you shared The Shmuts with other traders—whether that’s in a Discord group, on social media, or just with a trading buddy. It only takes a few seconds, but it helps more than you know.
Thanks so much for your support!