Market Recap – February 7, 2025
The buying and selling session opened with futures largely flat forward of the Nonfarm Payrolls (NFP) report, which got here in decrease than anticipated at 143K versus a forecast of 175K and a earlier studying of 256K. The market’s preliminary response was measured, with 6090 serving as the important thing Line in the Sand (LIS), which held firm despite early downside testing.
Key Levels & Price Action:
- Bullish Scenario: If price held above 6090, the initial target was 6115-6120, which was tagged early in the session following the NFP release.
- Bearish Scenario: If price sustained below 6090, the downside target was set at 6075-6070, which was later fulfilled as the market rotated lower.
- Intraday Observations: Consolidation around 6090 confirmed its importance as a pivotal level, while liquidity conditions played a role in certain erratic price movements.
Trading Cycle & Market Structure:
By afternoon, the market transitioned into Cycle Day 1, aiming to establish a secure low for the next rally. Both ES and NQ successfully met their Cycle Day 1 (CD1) Average Decline Targets, reinforcing the reliability of historical cycle patterns:
- ES (S&P 500 Futures): The Cycle Day 1 Average Decline target of 6072.50 was tagged, confirming a structured move lower before potential bullish continuation. Additionally, the Lower Average Decline Target of 6047.75 was also reached, aligning with the outlined trade strategy.
- NQ (Nasdaq Futures): The Cycle Day 1 Average Decline target of 21560 was met, demonstrating precision in cyclical price behavior.
Macroeconomic Developments:
Traders also monitored macro headlines, including reports on inflation expectations from the University of Michigan, which showed 1-year inflation expectations rising to 4.3% (vs. expected 3.3%) and 5-10 year expectations at 3.3% (vs. expected 3.2%). Additionally, reports emerged regarding potential reciprocal tariffs being considered by U.S. policymakers, adding another layer of uncertainty to market sentiment.
Educational Takeaways:
- The Importance of Key Levels: LIS zones (like 6090) provide critical decision-making points for both bulls and bears. Recognizing and respecting these areas enhances trade planning.
- Market Reactions to Economic Data: The NFP report influenced price action immediately, but sustained moves required confirmation through price structure and internals.
- The Role of Trading Cycles: Understanding the market’s cyclical nature, such as Cycle Day 1 behavior, allows traders to anticipate potential turning points. The successful fulfillment of ES (6072.50 and 6047.75) and NQ (21560) CD1 targets highlights the precision of cycle-based trading.
- Liquidity & Execution Risks: Instances of thin liquidity (as highlighted by Freddie’s experience) can lead to price overshoots and execution challenges, reinforcing the need for risk management.
- Macroeconomic Awareness Matters: Headline-driven volatility—such as tariff news or inflation data—can significantly impact price movements. Staying informed helps traders adjust their strategies accordingly.
The session concluded with a balanced approach to both upside and downside objectives, showcasing Ultra Precision in trade planning. Looking ahead, traders will monitor follow-through price action to determine if bulls can build upon the Cycle Day 1 foundation for the next potential rally.
Have a great weekend! (HAGWEE) 🚀
