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2025 - The Year of the Bonds
Danny Riley
January 17, 2025
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Our View
The ES opened on a semi-positive note, but the NQ sold off right from the opening print. It was another day of rotations, with the NQ leading the way. With only one trading session left before Trump takes office, the markets seemed unsteady or maybe it had to do with the mixed bag of earnings or maybe investors not knowing which way to turn.
After Wednesday’s bond rally, yields dropped for the third straight session. Despite 8 of the S&P's 11 sectors being in the green, the ES fell 0.3% and the NQ closed down 0.76%. TSLA closed down 3.4%, AAPL dropped 4%, and UnitedHealth fell 6%. It’s hard to have any type of sustained rally when it’s like that.
Our Lean
With inflation data coming out a little better the buyers have come flying back in. I’m a bull and like buying weakness, but I don’t trust any of this. Just look at Japan, bond yields just hit a 14-year high and the British Pound sold off down to a fresh 14-month low as their stock market fell and the yield on the 30-year UK government bond is hovering around 5.41% (after rising by 6 basis points to 5.472%, the highest since 1998). The 10-year yield is also up slightly at 4.85%.
As I always say, I’m not an economist, but I don’t think you have to be one to see that a credit crisis is on the horizon.
Our Lean: We have four economic reports this morning and it seems like ES 6000 is resistance. I’m looking for a two-way trade and selling the rips.
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Our Lean — Danny’s Trade
This is Danny Riley’s personal trading plan for the day.
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MiM and Daily Recap
The ES traded sideways to up during the overnight session, printing its high of the day at 6017.25 at 2:45 a.m. Then it was back and fill time, opening the regular session at 6001.75. With initial downward pressure, the ES printed an early low of 5973.25 at 9:58 a.m. This was followed by a period of choppy, whipsaw trading over the next 40 minutes. Eventually, the market resolved to the upside, testing the open and briefly breaking through to reach 6004.25 at 11:06 a.m.
However, this upward move proved to be a false breakout and marked the regular session high for the day. The ES fell back below the open and could never re-test it. It still didn’t become a trend for the bears, but the sellers got their fill as the ES printed 5978.25 at 11:42 a.m., bounced to 5998.50 at 12:26 p.m., but could not muster more as it then moved lower again and took out the session lows, printing 5969 at 1:46 p.m.
A strong bounce managed to get the ES back up to the 5993 level by 3:06 p.m. However, a heavy sell program emerged over the next 15 minutes, pushing the market down again to a lower high of 5991.75 just as the 3:50 p.m. MIM imbalance revealed only a small buy of $274 million, and the market dropped sharply into the close. The ES settled at 5975.50 on the cash close and continued selling off in the aftermarket, printing the day's low of 5961.75 at 4:24 p.m. A little profit-taking moved the ES back up slightly to its exchange closing print of 5969.50, down 18.25 points (-0.3%).
The NQ closed at 21,214.25, down 162.50 points (-0.76%). Volume was about average, with the ES trading 1.5 million contracts and the NQ trading 586,000.
In the end, it was a choppy and ugly trading day. The ES’s overall tone was weak but not like the NQ’s.
Technical Edge
MrTopStep Levels:
Fair Values for January 17, 2025
SP: 38.24
NQ: 152.68
Dow: 221.78
Daily Breadth Data 📊
NYSE Breadth: 65% Upside Volume
Nasdaq Breadth: 57% Upside Volume
Total Breadth: 58% Upside Volume
NYSE Advance/Decline: 61% Advances
Nasdaq Advance/Decline: 50% Advances
Total Advance/Decline: 54% Advances
NYSE New Highs/New Lows: 73 / 26
Nasdaq New Highs/New Lows: 85 / 113
NYSE TRIN: 0.94
Nasdaq TRIN: 0.77
Weekly Breadth Data 📈
NYSE Breadth: 43% Upside Volume
Nasdaq Breadth: 54% Upside Volume
Total Breadth: 49% Upside Volume
NYSE Advance/Decline: 23% Advances
Nasdaq Advance/Decline: 23% Advances
Total Advance/Decline: 23% Advances
NYSE New Highs/New Lows: 107 / 257
Nasdaq New Highs/New Lows: 265 / 360
NYSE TRIN: 1.35
Nasdaq TRIN: 0.82
Guest Posts:
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Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. - MrTopStep
What’s Happening in the Market
The equity market is in a positive gamma regime most of the time, but market gamma printed slightly positive today for the first time since December 25. For context, since 2018, 38.12% of market days have opened in negative gamma. And unless it turns around for the futures, tomorrow will be another one of those negative days.
Basket flows were mostly bearish all day and tried to bounce at the close, but this could not overpower the tale of two bearish index flows (between QQQ and S&P 500), which heated up in the Power Hour for a leg down: SPY -0.19%, QQQ -0.70%, and IWM +0.20%.
Normally, we would dive into basket flows, which were also bearish for the most part, but when we see one of the main index tickers show clean and decisive flows, then it generally seems to indicate that something is going on there. QQQ flows do not normally get much coverage, but they are a valuable tab because they can be compared directly with MAG7 which has QQQ as an underlying (in white). Here, put flows can be seen as the power-house all day, but the behavior of call flows is what was tipping the scale, such as forming bearish momentum flows at the end there (puts and calls both tilted cleanly downward).
And then on the generic S&P index flows, puts were also the consistent bearish powerhouse all day, but with call flows steering.
Shown below here is a basic bearish signal, but it would have been stronger if tall and steep and sharp. What ended up making this signal powerful was the confirmation that came after it, which was also in the form of bearish momentum flows.
Stacking bearish pressure on prices was also from the flows of time decay via charm, which can be seen with much red and little green surrounding the price action. What was being threatened here was a collapse of that noise into a Reduction pattern where that larger red area would congeal and then form an eddy all the way down at 5900.
There was not enough time for this Reduction pattern to manifest, and SPX closed 37 points above it, but this will likely be active support to look for in the future down there.
What to Watch for Next
Despite the moderate decline in equity prices, IV mostly stood still and it remains centered at fair value. This means that there would not necessarily be a disadvantage on either debit or credit verticals.
The market is standing on the fence right now and leaning toward tipping on the negative gamma side. It will be extra important to check the levels tomorrow morning and see where we stand so we know what kind of market to expect. The direction of the overnight futures drift will determine the positivity or negativity of that market gamma status.
Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. - MrTopStep
Trading Room News:
Polaris Trading Group Summary - Thursday, January 16, 2025
Market Overview and Morning Session
Cycle Day 3: David highlighted that the session followed a strong Cycle Day 3 dynamic, with targets exceeded in the prior session.
Initial Zones Hit:
ES reached the 6010-6015 zone.
NQ met its 21450-21500 target range.
Key Observations: Anticipation of MATD (Morning After Trend Day) rhythms set the tone for the session, focusing on range-bound trading rather than trending moves.
Trading Highlights
Crude Oil (CL):
Transitioned to March contracts.
Engaged in the OPR Short strategy, hitting multiple targets successfully, with TGT 1, TGT 2, and the final target filled by mid-morning.
Strategy execution was praised for precision, as noted by community members.
Equity Futures (ES/NQ):
Both ES and NQ executed OPR shorts effectively in the morning session.
Buyers responded positively at critical CPZ (Control Price Zone) levels, signaling potential reversals.
The session emphasized consistent two-way rotations with no significant trending behavior.
Key Trading Levels
ES Levels:
LIS (Line in the Sand): 5990.
Support zones: 5985-5980 and deeper targets at 5970-5965.
IB (Initial Balance) High: 6003; IB Low: 5973.
NQ: Multiple successful short plays with targets met throughout the session.
Notable Strategies and Lessons
Open Range Plays:
David's Open Range strategy showcased its edge with systematic short entries across instruments like CL and NQ. This approach reinforced the importance of back-tested strategies.
Community members appreciated the clarity and execution of these strategies.
Risk Management Insight:
DanV emphasized the necessity of a mechanical, well-defined risk management system, advising traders to focus on consistent execution rather than chasing trades or strategies.
Detachment from Results:
Yumi Sakura’s quote, shared by David, resonated with traders, highlighting the role of a trader as an executor of a system rather than someone emotionally tied to wins or losses.
Afternoon Session
Rotational Movements: The market exhibited balancing and neutral tendencies, aligning with expectations of two-way rhythmic action.
Final Moves:
A rotation from IB Low (5973) to Open Range Low (5993) capped the day with precision, underlining the balanced nature of the session.
Community Interaction and Q&A
The session included valuable community discussions on strategy execution, risk-reward considerations, and the importance of consistent application. DanV and David answered multiple questions, helping members refine their trading approach.
Q&A Session: Held at 4:15 PM, where traders delved deeper into setups, risk management, and signal interpretations.
Summary of Day’s Success
Traders benefited from multiple profitable setups, particularly in CL and NQ shorts.
The day emphasized disciplined execution in a range-bound market and reinforced the community's focus on long-term campaign thinking over single-day outcomes.
David and experienced members provided actionable insights, fostering growth for newer participants.
A productive and educational session with profitable opportunities and key lessons on consistency, risk management, and trading psychology.
DTG Room Preview – January 17, 2025
Market Recap
Markets faced a mixed session as tech stocks slid despite positive bank earnings. The Dow fell 0.1%, the S&P 500 dipped 0.2%, and the Nasdaq dropped 0.9%. Speculation around a Fed rate cut in July is building.Earnings Highlights
Bank of America (BAC): Profits doubled on deal-making but closed down ~1%.
Morgan Stanley (MS): Quarterly profit surge boosted shares by over 4%.
UnitedHealth (UNH): Revenue miss dragged the stock down ~6%.
Economic and Political Updates
Trump Treasury Secretary nominee Scott Bessent introduced his “3-3-3” economic plan, aiming for ambitious targets in GDP growth, budget deficit, and oil production, though experts call them unrealistic.
The US budget deficit remains high at 7% of GDP, with significant reductions unlikely due to political challenges.
Domestic oil production is expected to remain flat despite favorable conditions.
Bitcoin surged past $100K following reports of a proposed executive order prioritizing crypto, including plans for a dedicated advisory council.
Upcoming Events
Earnings Reports: Key premarket releases include CFG, FAST, HBAN, RF, SLB, STT, TFC, and WIT.
Economic Data: Watch for Building Permits & Housing Starts (8:30 AM ET) and Capacity Utilization & Industrial Production (9:15 AM ET).
Market Technicals
The ES short-term downtrend channel top (6005/02s) remains as resistance, holding Thursday’s high. Breaking above would signal short-term bullish potential, with the 50-day MA (6042.25) in play.
Key resistance levels: 6005/02s, 6360/65s. Support levels: 5833/38s, 5772/67s.
Volatility is steady, with the ES 5-day ADR at 88.25 points. Overnight large trader volume was insignificant.
Notable Reminders
US markets are closed Monday for Martin Luther King Jr. Day, coinciding with Donald Trump's inauguration.
S&P 500 — ES Futures
Calendars
Economic Calendar Today
This Week’s High Importance
Earnings:
