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Morning Market Analysis 16 May 2025

Market Overview and Sentiment News

U.S. equity futures rallied overnight as traders digested a stronger-than-expected April Retail Sales print (+0.6% MoM) and held out for tomorrow’s Fed minutes release. S&P 500 futures climbed ~0.4%, Nasdaq 100 futures gained ~0.5% on favorable tech earnings, while Russell 2000 futures underperformed, up only ~0.2%, reflecting lingering small-cap caution.

  • Retail Sales Beat: April Retail Sales jumped 0.6% MoM vs. 0.3% forecast, supporting cyclicals and consumer discretionary names.
  • Tech Earnings: Amazon and Apple pre-market commentary beat consensus revenue forecasts, driving Nasdaq futures higher.
  • VIX & Sentiment: VIX eased to 17.8 (from 19.2), pointing to lower fear; the AAII bulls rose to 43% from 39%, signaling renewed confidence.
  • China Tariff Talks: Extension of the U.S.-China tariff truce by 30 days reduces geopolitical risk, giving bullish tailwinds to export-driven sectors.

Technical Analysis Insight

Prices taken from 0545 this morning

  • ES (E-mini S&P 500): Trading above VWAP and the 20 EMA on 5‑minute bars, hugging the upper Bollinger Band. HVN at 5935, LVN at 5900. MACD histogram positive, RSI at 68—bullish bias but nearing overbought.
  • NQ (E-mini NASDAQ 100): Strong uptrend with price above mid‑BB and VWAP on 5‑minute. HVN 21475, LVN 21400. MACD crossover supports continuation; RSI 66 suggests momentum remains intact.
  • YM (E-mini Dow): Clear bullish channel; price holding above 42,500 overnight HVN and VWAP. LVN 42,400. Rising OBV confirms accumulation; MACD above zero—favorable for longs.
  • RTY (E-mini Russell 2000): Recovery off LVN 2090, now above 2105 HVN and VWAP. MACD histogram turning positive; RSI 64 indicates room to run—bullish small‑cap signal.

Today’s Technical Take: All major equity futures are exhibiting strong intraday uptrends, supported by VWAP and EMA confluence, with positive momentum readings. Traders should favor long bias on pullbacks to VWAP or mid‑BB, watching for overbought RSI readings to manage risk.

Foundational Analysis

  • Consumer Spending (Retail Sales): April Retail Sales +0.6% MoM.
    • Bull Case: Strong consumer demand underpins cyclical and discretionary stocks.
    • Bear Case: Rising interest rates could curb spending, pressuring small caps.
  • Fed Minutes Preview: FOMC minutes due May 17 may reveal a bias toward patience.
    • Bull Case: Dovish language could spark a rally across equity futures.
    • Bear Case: Hawkish caveats on inflation risks may trigger volatility spikes.
  • Inflation Signals (PPI & CPI): Core PPI held flat in April; CPI due May 22.
    • Bull Case: Cool inflation data will ease Fed tightening fears.
    • Bear Case: Any upside surprise keeps rate-hike bets alive, weighing on futures.
  • Tech Sector Health: Tech earnings season 79% beat EPS estimates so far.
    • Bull Case: Continued beat rates support Nasdaq leadership.
    • Bear Case: Valuation fatigue could cap further upside in megacaps.

Overall Bias: Bulls have the edge into Fed minutes, but rate-sensitivity and valuation risks warrant caution near all-time highs.

Upcoming Economic and Trading Events

  • May 16 — Building Permits (Preliminary Apr): 8:30 AM ET — Bullish: reading above the 1.45M consensus signals stronger housing demand; Bearish: a print below consensus indicates cooling construction activity.
  • May 16 — Housing Starts (Apr): 8:30 AM ET — Bullish: a figure above 1.31M suggests robust residential building; Bearish: any miss warns of a slowdown in new home construction.
  • May 16 — Building Permits MoM (Preliminary Apr): 8:30 AM ET — Bullish: positive MoM growth (above 0%) points to expanding permit activity; Bearish: a decline signals weakness ahead.
  • May 16 — Export Prices MoM (Apr): 8:30 AM ET — Bullish: a rebound or stability above 0% eases export margin concerns; Bearish: a deeper drop could signal deflationary pressures abroad.
  • May 16 — Import Prices MoM (Apr): 8:30 AM ET — Bullish: a smaller-than-expected decline eases input-cost worries; Bearish: a larger drop may point to weak domestic demand.
  • May 16 — Michigan Consumer Sentiment (Preliminary May): 10:00 AM ET — Bullish: a print above 52.5 indicates rising consumer confidence; Bearish: a miss reflects softer consumer outlook.
  • May 16 — Net Long-term TIC Flows (Mar): 4:00 PM ET — Bullish: a surge above $44.2B signals strong foreign capital inflows; Bearish: a drop suggests waning international demand for U.S. assets.

Strategy for Scalpers

Order Flow & Volume Profile Tactics

  • Order Flow Confirmation: Enter trades only when aggressive market orders confirm direction. For shorts in ES/NQ: look for price retests of HVNs (5900, 21400) on rising sell delta. For longs in RTY: watch for delta divergences at LVN supports.
  • Volume Profile Levels: Use overnight HVNs/LVNs as primary target and stop zones. Scale into positions at LVN dips for mean-reversion scalps and scale out at nearby HVNs to capture liquidity pockets.
  • Event-Aware Scaling: Ahead of Retail Sales and Jobless Claims, reduce position sizing by 50% at HVNs to mitigate risk, then re-enter on order flow breakouts with full size once the post-release micro-range is established.
  • Risk & Size via ATR: Calculate 1‑minute ATR and set stop at 0.5× ATR; take profit at 1× ATR for optimal scalping R:R, adjusting size based on order flow intensity.
  • News-Driven Liquidity Influx: Capitalize on spikes in volume profile around economic releases by hunting fast fills at temporary LVNs; use aggressive limit orders at profile gaps.
  • Adaptive Bias: Align scalp direction with foundational signals—bearish for ES/NQ post-PPI, neutral/range for YM, and opportunistic bounces for RTY on consumer spending strength.
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  • Scalp Entry Filters: Use the overnight POC/HVN from the Technical Analysis section to define the bias zone; only enter scalps in the direction of POC breaks confirmed by 2‑period RSI overshoot on the 1‑minute chart.
  • Quick Flatten Trigger: Set an auto-flatten at 0.3× ATR on a 1‑minute timeframe if price reclaims VWAP against your position within three bars.
  • Post‑Event Scalping: After FOMC minutes or CPI prints, wait for a stable 3‑bar micro‑range on 1‑minute charts and then scalp any breakout beyond the range’s high/low with half-normal size.
  • VWAP Pullback Entries: In strong uptrends across ES, NQ, YM, and RTY, focus on long scalps on 1‑minute pullbacks to VWAP or the middle Bollinger Band, confirmed by RSI dipping near 50 and rebounding.
  • Overbought Reversal Scalp: When 1‑minute RSI > 70 and MACD momentum slows, consider quick short scalps back toward mid‑BB with tight stops.
  • Volume Spike Confirmation: Look for 1‑minute volume exceeding the 20‑period average to validate breakout or breakdown scalps, aiming for a 1:1 risk‑reward using ATR targets.

Summary

Given the strong overnight rally in U.S. equity futures, bullish technical alignment above VWAP/EMAs on multiple timeframes, and generally supportive economic prints this morning, the market is likely to extend gains into today’s session. Expect a continued rally, especially on pullbacks toward key intraday support levels, while remaining mindful of potential knee‑jerk reactions around any minority bearish sentiment signals.

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