Morning Market Analysis 19 May 2025

Market Overview and Sentiment News

U.S. equity futures tumbled on Monday following Moody’s downgrade of the U.S. sovereign credit rating to Aa1, with S&P 500 E-minis down 1.23%, Nasdaq 100 E-minis falling 1.61%, and Dow E-minis sliding 0.78% as Treasury yields rose amid elevated fiscal concerns. April retail sales edged up just 0.1% MoM, missing the 0.3% forecast and highlighting potential consumption headwinds. Tech sector softness persisted after Applied Materials saw its shares decline over 5% on a revenue miss. However, sentiment improved later in the session with reports of a temporary U.S.-China tariff truce, cushioning downside risk. VIX surged to 19.5, reflecting increased investor anxiety.

• Moody’s Downgrade: U.S. credit rating cut to Aa1, sparking a sharp futures decline.
• Retail Sales Miss: April retail sales +0.1% MoM vs. +0.3% expected—bearish for consumption-driven stocks.
• Tech Earnings Pressure: Applied Materials’ Q2 revenue miss led to a >5% share drop.
• Trade Truce: Extension of U.S.-China tariff moratorium provides a bullish catalyst.
• Volatility Spike: VIX rose to 19.5, signaling elevated market unease.

Technical Analysis Insight

Prices taken from 05:45 this morning

• ES (E-mini S&P 500): Downtrend below VWAP and 20/50 EMAs on 5‑minute bars, hugging lower Bollinger Band. HVN at 5925, LVN at 5900. MACD histogram negative but fading; RSI 34 near oversold — bearish bias with relief bounce potential at LVN.
• NQ (E-mini NASDAQ 100): Trading below VWAP and mid‑BB, consistent downtrend. HVN at 21470, LVN at 21400. MACD bearish but histogram narrowing; RSI 33 in oversold territory — strong downside momentum but watch for bounce off LVN.
• YM (E-mini Dow): Price below VWAP and EMAs, moving along lower BB. HVN at 42565, LVN at 42430. MACD negative; RSI 43 suggests moderate bearish momentum — cautious short bias on rally to VWAP.
• RTY (E-mini Russell 2000): Persistent weakness under VWAP and mid‑BB. HVN at 2080, LVN at 2070. MACD negative but improving; RSI 22 deeply oversold — likely bounce zone ahead.

Today’s Technical Take: All major futures are in firm intraday downtrends under key moving averages with oversold readings in most contracts. The bias remains bearish into relief rallies; consider shorting on moves back to VWAP or mid‑BB, while remaining alert for oversold bounces at LVN value area lows.

Foundational Analysis

• Moody’s Downgrade: U.S. credit rating lowered to Aa1 on May 16—Bear Case: higher borrowing costs and risk-off sentiment; Bull Case: limited long-term impact if fiscal policy stabilizes.
• Consumer Spending: April retail sales +0.1% MoM—Bear Case: slowing consumption may weigh on retail futures; Bull Case: resilient core spending excluding autos and gas.
• Fed Minutes Recap: May 17 minutes showed cautious tone, highlighting persistent inflation—Bear Case: hawkish tilt risks spooking markets; Bull Case: absence of immediate rate-hike bias supports risk assets.
• Inflation Signals: PPI fell 0.5% in April, CPI due May 22—Bear Case: upside CPI surprise could prolong tightening; Bull Case: cooler PPI readings bolster hopes for rate easing.
• Tech Sector Health: 79% of tech firms beat EPS estimates, but valuation fatigue looms—Bear Case: stretched multiples may cap upside; Bull Case: strong earnings underpin Nasdaq futures.

Overall Bias: Elevated risk-off from credit and inflation concerns, but broader economic resilience and trade developments leave room for selective upside in equity futures.

Upcoming Economic and Trading Events

• May 19 — Fed Speakers: Bostic, Jefferson, Williams, Logan, Kashkari (various times ET) —Bullish: dovish comments could lift futures; Bearish: hawkish rhetoric may spark volatility.
• May 20 — Philadelphia Fed Non-Manufacturing (May): 8:30 AM ET —Bullish: reading above prior -42.7 indicates service sector expansion; Bearish: further contraction stokes recession fears.
• May 21 — $16B 20-Yr Treasury Auction: 1:00 PM ET —Bullish: strong demand eases yield pressure; Bearish: weak bids push yields higher and drag futures.
• May 22 — Initial Jobless Claims: 8:30 AM ET —Bullish: claims below 226K signal labor market strength; Bearish: upside surprise suggests economic slowdown.
• May 22 — S&P Flash PMIs: 9:45 AM ET —Bullish: composite above 50.5 points to expansion; Bearish: sub-50 print signals contraction risk.
• May 22 — Existing-Home Sales (Apr): 10:00 AM ET —Bullish: rebound above 4.0M SAAR signals housing demand; Bearish: miss reflects cooling construction.
• May 23 — New-Home Sales (Apr): 10:00 AM ET —Bullish: SAAR above 705K shows healthy market; Bearish: decline indicates housing market slowdown.

Strategy for Scalpers

Order Flow & Volume Profile Tactics

• Short on Rallies to VWAP/Mid-BB: With prevailing downtrend, enter short scalps on 1‑minute 2‑period RSI pullbacks towards VWAP or the middle Bollinger Band, confirmed by aggressive sell delta.
• LVN Bounce Plays: For oversold NQ, ES, and RTY, look for long scalps off LVNs (ES 5900, NQ 21400, RTY 2070) when RSI drops below 35 and shows divergence with buy‑side order flow spike.
• VWAP Reclaim Traps: Be cautious of false VWAP reclaims; use volume spike confirmation before scaling in and set tight stops at 0.3× ATR.
• MACD Momentum Filter: Favor trades in direction of MACD histogram momentum shift—shorts when histogram deepens, longs when histogram turns positive after oversold.
• Event-Driven Size Reduction: Ahead of S&P Flash PMIs (9:45 AM ET) and Initial Jobless Claims (8:30 AM ET), reduce position sizes by 50% and widen stops by 0.2× ATR to accommodate potential volatility.
• Flatten on VWAP Break: Auto-flatten shorts if price crosses above VWAP on a strong bar, and longs if price falls below LVN on volume surge.

Summary

Given the risk-off tone following Moody’s downgrade and soft retail data, U.S. equity futures remain in intraday downtrends under VWAP and key EMAs with oversold readings across major contracts. The overall bias is bearish into relief rallies; consider short scalps on moves back to VWAP or the middle Bollinger Band, targeting LVN support levels (ES 5900, NQ 21400, YM 42430, RTY 2070). Watch for potential oversold bounces at these LVNs but manage risk closely, reducing size and widening stops ahead of S&P Flash PMIs and Initial Jobless Claims.