The Market Brief
Hey team. The overnight session has struggled to find solid direction as we brace for another slew of economic reports, along with heavyweight earnings that will continue the volatile theme.
Let’s recap Monday’s session and see what’s next for the market!
Impact Snapshot
🟥 JOLTS Job Openings - 10:00am
Key Earnings: GOOGL 0.00%↑ AMD 0.00%↑ SNAP 0.00%↑ PYPL 0.00%↑
Macro Viewpoint
Stocks struggled for traction as traders worried about the economic implications of tariffs while parsing the latest batch of earnings.
Shortly after President Donald Trump’s 10% tariff on China took effect at 12:01 a.m. ET, China’s finance ministry responded by announcing tariffs on select U.S. imports.
In addition, Trump had imposed a 25% tariff on goods from Mexico and Canada over the weekend but later agreed to a 30-day pause on Monday in exchange for concessions related to border security and crime from both nations.
The last-minute adjustment allowed the three major U.S. stock indexes to recover some of the steep losses recorded earlier in the session, ultimately closing well above the day's lows.
Meanwhile, investors are looking ahead to economic data, with a December job openings report set for release after the bell on Tuesday and the highly anticipated January nonfarm payrolls report scheduled for Friday.
Prior Session Deep Dive
Price by itself is simply an advertising mechanism. It doesn’t have any context. To really put context around price, you need to evaluate it in time/price/volume.
What we’re trying to do is add that context to price and better appreciate what the market is trying to do instead of being emotionally attached to price by itself.
All the market references you see in this chart, along with the channel, gap area and contextual analysis was posted yesterday during the overnight session.
Our Sunday article titled “It Was the News” was not an over-exaggeration regarding the fact that price action reflects human emotions and whatever fundamental reason is happening in response to how the market is reacting. Read it here.
This is a list of data points that we gathered to create our report card yesterday.
Extreme short overnight - Refrain from piling on extremes = high risk
The market bounced exactly at the channel you see on the chart. Do you think any serious money selling the market—that wasn’t weak emotional traders—would have trouble breaking down from such an obvious reference?
Overnight is controlled by weak emotional traders. No directional move can be sustained if it is NOT joined by higher volume in that direction.
Great disconnect between previous value and price.
Acceptance above the flip zone would see acceptance inside a gap, and the destination target is the gap fill.
35-point rejection at a stacked confluence area: This includes the midpoint of the channel, anchored VWAP, and our first upside pivot, followed by a pullback towards the “flip zone” to reload longs.
Destination and bullish scenario target: The destination and absolute top for the bullish scenario for the session was the settle.
From our technical perspective, those are some of the things we were looking at, and we placed those references at these specific spots. There are ZERO new concepts from what we’ve been highlighting for years in this session. We don’t “predict” markets. We simply build a framework to know how to react if market continues towards a directional move.
"Headline: New tariffs to Canada and Mexico" → Market sells off and bounces exactly at a channel’s trend line.
“Headline: Trump delays tariffs” → Market breaks out from a triple top (extremely poor highs and unfinished upside auction), finds acceptance inside a gap, and fills that gap towards the settle to end the session.
Random? Could be. Nobody beats the randomness and uncertainty of the markets. Traders hate that uncertainty, and that’s not something most people want to hear.
But guess what? The market doesn’t care about your feelings. Market preparation is the best tool you’ve got to navigate some of that uncertainty and that’s exactly what we do in our Substack.
