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Making Sense of it All
Danny Riley
August 12, 2025
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Our View
No one wants to think about it, but we all know the economy is in a state of flux. According to a Wall Street Journal poll, 60% of Americans are concerned about record downward job revisions, 63% are concerned about inflation, 67% are concerned about affordable health care, 61% are worried about housing affordability, and 57% are concerned about the national deficit. Plain and simple, there are “reasons to be concerned,” and these are just a few on the list.
I often wonder how the economic downturn is affecting people who were already having a hard time because I really don’t see lower prices anywhere, other than at the gas pump. Currently, the CME’s Fed Funds are showing a 93% probability of a September rate cut. Come hell or high water, Trump wants lower rates, and today’s CPI data will be a determining factor. Below are CPI estimates from JP Morgan and Goldman Sachs.
JP Morgan CPI
According to Fabio Bassi at JP Morgan, the “Fed put” is in full effect: “We expect moderate weakening in the macro data, but enough to trigger a prompt Fed response in September.” Historical experience indicates that the full impact of tariff pass-through still requires a 3- to 5-month lag. Therefore, the upcoming series of economic data is crucial for the September meeting’s decision. Among these, the July CPI to be released this Tuesday will clearly show the beginning of tariff-driven inflation, with the core CPI expected to accelerate from 0.23% to 0.32% year-over-year.
Goldman Sachs CPI
Goldman Sachs economists predict that the core Consumer Price Index (CPI) will rise by 0.34% in July, pushing the year-over-year rate to 3.1%. They also anticipate that the overall CPI will increase by 0.27%. These forecasts suggest that inflation, particularly driven by tariffs, is expected to continue rising.
In yesterday’s Our Lean, I explained the pattern the price action has been following when the ES opens higher—gap up, pullback, and then double pump—and that’s exactly what happened. The ES gapped higher, sold off a little, and then started to rally before reversing. This not only set up the price action for the day, it also led to the 3:50 imbalance, which came out $1.2 billion to sell and then pushed the market down to new lows. In terms of the overall tone, the ES made a 1-week high (mid-day), and the NQ made a new all-time contract high. In terms of the ES’s overall trade, volume was low at 1.038 million contracts traded.
Our Lean — Danny’s Trade (Premium only)
MiM and Daily Recap
ES Futures Recap
The overnight Globex session opened at 6422.75 and began on a weak note, dipping to an early low of 6411.00 at 19:10, down 11.75 points (-0.18%) from the open. Buyers then staged a strong recovery, lifting the contract to 6429.50 at 22:20, marking a 16.50-point rally (+0.26%). The uptrend extended into the early morning hours, making a top at 6428.25 at 03:00 before sellers took control, driving ES down to the session low of 6408.50 at 04:00, a 20.00-point drop (-0.31%) from the prior high. Another rebound into the 08:20 mark reached 6426.75, but this gain was short-lived, with the contract sliding back to the Globex close at 6416.25, down 6.50 points (-0.10%) from its open, but still 2.25 points (+0.04%) above the previous cash close.
The regular session opened at 6416.25 at 9:30 ET. Early morning chop led to a peak at 10:20 at 6421.50, an 11.50 point gain from the opening candle low. Sellers then took the opportunity and sold the market down to a lower lower of 6406.75, down 14.75 from the previous high. From there the tone flipped and a steady bid carried price to the high of the day of 6431.50 at 12:10. That midday peak marked the turning point: from 12:10 a persistent, one-way decline unfolded with a stair-step of lower highs and lows into the afternoon, culminating in the session low at 6387.50 at 15:50 (LL) as the MIM was broadcasting live the closing imbalance. A nice 14-point bounce on the MIM trade took ES into the close at 6400.00. For the day, regular hours finished down 16.25 points (-0.25%) from the open and down 14.00 points (-0.22%) from the prior cash close.
In the brief Cleanup session, prices opened at 6400.25, ticked up to 6401.75, but then eased into a close of 6396.50, down 3.75 points (-0.06%) for the hour.
Full-session volume totaled 1,031,724 contracts, with 872,721 traded during regular hours, reflecting medium participation.
Market tone turned decidedly bearish by the afternoon. The morning’s early swings showed two-sided trade, but each rally was capped, culminating in a failed midday breakout. The inability to hold above 6430 set the stage for aggressive afternoon selling.
The MOC imbalance data showed a heavy sell bias, with dollar percentage at -65.8% and symbol percentage at -60.9%. At 15:51, sell imbalances totaled $-1.4B. The initial imbalance catalyzed the 15:50 selling, but the pace of pairing on the live data soon showed nothing to fear, and the market rebounded sharply into the close.
In summary, the day started with mixed overnight trade, transitioned into choppy but contained moves in the morning, and then broke decisively lower in the afternoon as sellers took control into the close. The market remains under pressure heading into the next session, with 6387.50 as the key short-term support to watch.
Technical Edge
Fair Values for August 12, 2025:
SP: 22.33
NQ: 98.68
Dow: 90.09
Daily Market Recap 📊
For Monday, August 11, 2025
• NYSE Breadth: 38% Upside Volume
• Nasdaq Breadth: 59% Upside Volume
• Total Breadth: 57% Upside Volume
• NYSE Advance/Decline: 43% Advance
• Nasdaq Advance/Decline: 44% Advance
• Total Advance/Decline: 43% Advance
• NYSE New Highs/New Lows: 81 / 63
• Nasdaq New Highs/New Lows: 150 / 140
• NYSE TRIN: 1.23
• Nasdaq TRIN: 0.55
Weekly Breadth Data 📈
For Week Ending Friday, August 8, 2025
• NYSE Breadth: 55% Upside Volume
• Nasdaq Breadth: 60% Upside Volume
• Total Breadth: 58% Upside Volume
• NYSE Advance/Decline: 66% Advance
• Nasdaq Advance/Decline: 57% Advance
• Total Advance/Decline: 60% Advance
• NYSE New Highs/New Lows: 233 / 130
• Nasdaq New Highs/New Lows: 385 / 324
• NYSE TRIN: 1.60
• Nasdaq TRIN: 0.91
I’ll keep the format consistent from here on. Let me know when you're ready for tomorrow’s data.
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ES & NQ Levels (Premium only)
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Earnings
Trading Room Summaries
Polaris Trading Group Summary - Monday, August 11, 2025
Opening Tone:
David outlined Cycle Day 2 (CD2) expectations: consolidation/back-and-fill after Friday’s high close.
Morning Session:
Early range defined as 6410–6420 “sandbox” with expected MATD rhythms.
Price action indecisive—equal-size candles/wicks.
Manny noted potential ONL break/fail setups but stayed cautious.
SPX/ES correlations discussed (SPX 6400 ≈ ES 6427).
General approach: wait for commitment before entering.
Midday:
Market held within morning pivot zones.
Buyers appeared disinterested; slow grind lower began.
Afternoon Session:
Bear scenario triggered: price sustained below 6415, targeting 6400–6395.
Price respected Friday’s 6405–6408 pivot zone before testing lower.
Dynamic D-Level Money Box tag led to a bounce.
Volume stayed subpar (<1M) — typical “Dog Days of Summer.”
Traders cautious ahead of Wednesday’s CPI report.
Closing Action:
$1.3B MOC sell imbalance fueled bearish momentum into the close.
Gamma Guys VOL Trigger at 6389 hit, producing a late-day buy response.
Positives & Lessons Learned:
Patience was rewarded—best opportunities came from waiting for key level breaks.
Bear scenario played out exactly as planned, validating pivot zone prep.
Respecting predefined levels (6415 breakdown, 6389 VOL Trigger) gave high-confidence trade locations.
In low-volume, pre-news environments, fewer trades with higher quality is the winning approach.
Discovery Trading Group Room Preview – Tuesday, August 12, 2025
Markets are focused on this morning’s July CPI report (8:30 AM ET), with Bloomberg forecasting headline CPI at 2.8% (up from 2.7% in June) and core CPI at 3.0% (up from 2.9%). A hotter print could dampen expectations for a September Fed rate cut.
Geopolitics & Trade:
President Trump signed an executive order extending a 90-day pause on additional tariffs on China; current Chinese imports face 30% tariffs. Soybean futures fell over 1% on the news.
Trump also stated “Gold will not be Tariffed!” — gold futures were little changed.
Corporate & Tech:
Intel (INTC) shares jumped after CEO Lip-Bu Tan met with Trump, following calls for his resignation last week. Both sides will reconvene next week with proposals on US tech leadership.
Nvidia (NVDA) and AMD agreed to a 15% revenue share with the US government for AI chip sales to China, prompting Beijing to warn against Nvidia’s H20 chips. Huawei’s Ascend 910C chip reportedly outperforms the H20 by 5×. Legal experts say the US deals could face lawsuits.
Autos:
Ford (F) revealed a new EV platform focused on simplicity, scalability, and cost reduction. First model: $30K mid-sized pickup, due 2027.
Earnings:
Premarket: CAH, ONON, SE, SMMT, TME
After-hours: EC
Market Levels & Volatility:
ES 5-day ADR: 64.75 pts — volatility remains subdued ahead of CPI.
Key ES trendline resistance: 6546/51, 6598/03; support: 6304/09, 6233/38, 5756/64.
