Rate-Cut Roulette: Everyone’s Long and the Tape’s Getting Nervous

Our View

It’s going to be a busy week, and while some of last week's numbers met expectations, the September core PCE inflation cooled to 2.8% year-over-year as expected (down from 2.9%). Yet durable goods spending jumped 1.4%, underscoring continued consumer strain from still-elevated prices. The final University of Michigan December Sentiment Index rose more than forecast to 53.3 (from 51.0).

This Tuesday’s rate cut is highly anticipated, but risks of re-accelerating inflation and renewed household affordability are still a huge concern for the public. And Trump has already chosen Kevin Hassett.

I gotta be honest — I was very pointed on the December 2024 rate cut, saying they should not lower rates as inflation was rising. They did lower rates, and by Friday, December 13, the S&P 500 had declined a total of 3.2% from its December 10 close.

Market Recap

The ES traded up to 6886.25 on Globex and opened Friday's regular session at 6875.25, up 7.75 points or +0.11%. It dipped slightly to 6874.00, then rallied 31 points up to 6905.00 at 10:30. From there, it sold off 34 points down to 6871.00 at 11:40, rallied up to 6887.25, then sold off again to 6866.26 at 12:35.

The ES bounced to 6888.00 at 1:10, pulled back to 6875.75 at 1:20, and rallied up to 6890.50 at 1:30. It then sold off to 6876.25 at 2:40, rallied again to 6884.75 at 2:55, and sold off once more to 6869.50 at 3:45.

It traded 6871.00 as the 3:50 cash imbalance showed $2.1 billion to sell, dipped to 6866.75, then flipped to a $1.8 billion buy imbalance and traded 6876.75 on the 4:00 cash close. After 4:00, the ES traded up to 6881.75, flatlined, and settled at 6878.25, up 11.5 points or +0.17%.

After 43 days of no economic reports, Friday's benign inflation data and improving consumer sentiment helped offset pressure from rising bond yields. The Fed’s preferred gauge, September core PCE prices, increased exactly as expected at +0.3% month-over-month and +2.8% year-over-year. Personal income grew more than anticipated at +0.4% m/m, while spending rose in line at +0.3% m/m.

The final University of Michigan December survey added more good news:

• Consumer sentiment climbed to 53.3, better than the expected 52.0

• One-year inflation expectations dropped to an 11-month low of 4.1% (vs. 4.5% expected)

• Five- to ten-year inflation expectations eased to 3.2% (vs. unchanged 3.4% forecast)

Despite the supportive data, equity gains remained modest as the 10-year Treasury yield climbed to a two-week high of 4.14%.

As of the close, the CME FedWatch tool showed an 87% chance that the U.S. Federal Reserve will deliver an interest rate cut next week, with further cuts expected in 2026.

In the end, it was a data-filled day that supported the ES and NQ back to where they were on 11/12/25.

In terms of the ES's overall tone, the markets were firm but whippy. In terms of the ES's overall trade, total volume was 1.266 million contracts, the lowest for a full session since 10/24/25. 

BTS Levels - (Premium Only)

Polaris Trading Group Summary - Friday, December 5, 2025

Friday’s trading session in the Polaris Trading Group room was a classic example of a day with early potential that faded into midday chop and consolidation, ultimately turning into a battle for balance. PTGDavid emphasized capital preservation while highlighting trade setups, key levels, and rhythmic transitions throughout the day. There were a few solid opportunities for both bulls and bears, though the overall tone was cautious heading into the weekend.

Key Themes and Highlights:

Morning Setup & Strategy

• The overnight session was bullish, fulfilling the initial target zone laid out in the DTS Briefing.

• Bull scenario: A hold above 6865 would target the 6880–6895 zone.

• Early lean was to buy dips, with an initial sandbox (balance range) identified between 6875–6885.

• Economic data (PCE and UMich) came in exactly as expected, clearing the way for bullish continuation.

Trade Opportunities & Market Action

Morning Action (9:30 AM – 10:30 AM):

• Market rhythm transitioned into an up grinder post-economic data.

• David issued a bullish mission briefing, encouraging traders to target the ignition belt at 6865–6880.

• Short-term longs were favored early as price reclaimed the ignition zone.

• "Capital Preservation Fryday" mood set in, but with potential fireworks hinted for the close.

Midday Shifts (10:30 AM – 1:00 PM):

• Price consolidated and lost upward momentum.

• Bulls lost control, and Bo was noted for crushing it—likely catching a solid short.

• David called out an A4 short trade setup, which ran the stops, confirming bear momentum.

• Bears gained control, with David marking 6865 as the new LIS (Line in Sand).

• VWAP back-test (85–87) gave another solid A10 short opportunity, reinforcing bear dominance.

Afternoon Grind (1:00 PM – Close):

• Price chopped in a balance zone between 6870–6890, with 6880 as midpoint.

• Afternoon was quiet with “no real edge,” leading David to jokingly call for burgers and beers.

• Final hour brought MOC (Market on Close) imbalance volatility:

  • Initially a $2.1B sell imbalance

  • Flipped to a $1.8B buy imbalance—another example of typical MOC “trickery”

  • Traders called out the unreliable data feed with light-hearted frustration

Lessons & Takeaways

• Patience pays: Early bullish setups played out, but traders who waited for confirmation of rhythm shifts had better entries, particularly on shorts.

• Adapt to rhythm: Transition from bullish grind to consolidation to bearish control was a textbook day for rhythm recognition.

• VWAP tags + structure held up well as useful reference zones for entries (e.g., VWAP back-test led to solid short).

• Capital preservation mindset helped traders navigate a choppy midday and avoid overtrading.

• End-of-day imbalances remain volatile and unreliable—treat them with caution.

Positive Trade Calls

• Early long dips above 6865 into ignition zone worked well

• A4 and A10 short setups were clearly called and played out profitably

• VWAP back test short was a strong afternoon scalp opportunity

Closing Vibe:
While Friday didn’t offer fireworks into the close, the session rewarded disciplined traders who followed the rhythm shifts and managed risk. It was a Fryday of balance, deception (thanks to the MOC), and a reminder that sometimes the best trade is to preserve capital and plan for the next battle.

DTG Room Preview – Monday, December 8, 2025

• Fed Week & Macro Focus

  • Markets expect an 87% chance of a 25bps Fed rate cut on Wednesday.

  • Key focus: Powell’s press conference and year-end “dot plot” projections.

  • Last meeting for current Fed voters (Boston, Chicago, St. Louis, Kansas City); new voters from Cleveland, Minneapolis, Dallas, and Philly rotate in.

  • Bond market uneasy — 10Y yield jumped 10bps last week, reflecting inflation concerns limiting aggressive cuts.

  • Fed chair replacement speculation continues into 2026.

  Economic Calendar & Earnings

  • Tuesday: November + delayed September JOLTS job openings.

  • Last week’s data: ADP & Challenger showed job losses; PCE showed inflation moderation — boosting rate cut hopes.

  • Earnings highlights this week: ORCL, ADBE, AVGO, COST.

  • Today: TOL reports after the bell; ASO & AZO report Tuesday morning.

  • Today’s calendar is light; volatility still moderate but could rise post-Fed.

  ES Technical Levels

  • ES grinding higher; 5-day ADR: 52.5 pts.

  • Holding above former short-term channel top (6768/63s) and 50-day MA (6779.25).

  • Bulls and bears have room to work technically.

  Key Technical Levels

  • Resistance: 7265/70s, 7400/05s

  • Support: 6768/63s, 6598/03s, 6453/48s