The Market Brief
Hey team. The first key economic reports of the year are set to be released today at 10:00 AM, and the odds are good that we’ll see a good amount of volatility.
Let’s re-cap Monday’s session and see what’s next!
Impact Snapshot
🟥 ISM Services PMI - 10:00am
🟥 JOLTS Job Openings - 10:00am
🟨 10-y Bond Auction - 1:01pm
Macro Viewpoint
U.S. stock index futures were little changed on Tuesday as investors awaited key economic data, seeking clues about the policy direction of the incoming Trump administration.
Economic indicators showing continued strength could temper expectations for the pace of monetary easing by the Federal Reserve this year. However, rising unemployment could complicate the Fed’s decisions, especially if inflation remains persistently high.
The central bank would face the challenge of balancing aggressive rate cuts to support growth against the risk of reigniting inflation, while avoiding a slow approach that could exacerbate economic vulnerabilities.
Traders anticipate the Fed to adopt a dovish stance in June for the first time this year, following its projection of up to a 50 basis point rate cut in 2025.
Prior Session Deep Dive
Monday’s session followed the exact path outlined in our bullish scenario, targeting the precise reference points we had marked on our chart during the overnight session.
The reason we need a solid framework and clearly defined scenarios is to eliminate last-minute preparation regarding potential market movements, allowing us to focus on momentum.
It’s a lot easier to react when you’ve already thought about it, right? The overnight session leaned heavily towards an extreme long inventory. More often than not, such extreme overnight inventory has a high probability of experiencing a correction.
As the market approached the key “flip zone,” we observed a significant correction, as visualized on the chart. This presented both a shorting opportunity and a much safer long opportunity for higher rotations.
Once the market “flipped” this key reference, it challenged the unfilled gap at the destination target but rejected aggressively from our initial upside levels. This led to a massive shorting opportunity that partially filled the overnight gap.
