Market Recap – February 7, 2025
The trading session opened with futures largely flat ahead of the Nonfarm Payrolls (NFP) report, which came in lower than expected at 143K versus a forecast of 175K and a previous reading of 256K. The market’s initial reaction was measured, with 6090 serving as the key 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) 🚀