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Morning Market Analysis 20 May 2025

Market Overview and Sentiment News

U.S. equity futures kicked off the week mixed, reflecting lingering uncertainty after Moody’s sovereign downgrade and softer retail data. S&P 500 E-minis are holding near flat, while Nasdaq 100 and Russell 2000 futures trade with slight gains as technology earnings season begins to show pockets of strength. Treasury yields have pulled back modestly from recent highs after dovish comments from Fed officials, easing some financial conditions. Meanwhile, oil prices held near $75 amid OPEC+ supply discipline, and a tentative U.S.-China tariff extension has tempered geopolitical risk.

  • Tech Earnings: Early beats from key semiconductors delivered upside surprises, supporting Nasdaq futures.
  • Fed Dovish Tilt: Multiple Fed speakers (Mester, Bullard) signaled patience on rates, calming yield-driven headwinds.
  • Retail Data: April retail sales +0.1% MoM underwhelmed, but core spending remained resilient.
  • Oil Stability: Brent near $75 on OPEC+ cuts, bolstering energy sector sentiment.
  • Trade Friction Eases: Reported tariff moratorium extension with China has eased risk-off flows.

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

  • Monetary Policy: Fed speakers emphasized a wait‑and‑see approach—Bull Case: stable rates support risk assets; Bear Case: sticky inflation could prolong tightening.
  • Fiscal Health: Moody’s downgrade to Aa1—Bull Case: market priced it in; Bear Case: higher funding costs weigh on stocks.
  • Earnings Pulse: Tech reporting season showing mixed results—Bull Case: broad beat trend; Bear Case: margin pressures ahead.
  • Macro Data: Retail sales miss vs. strong industrial production—Bull Case: mixed data leaves door open; Bear Case: consumer slowdown risk.
  • Global Factors: OPEC+ and China trade headlines—Bull Case: coordinated supply cuts; Bear Case: geopolitical flashpoints.

Overall Bias: A cautious hold in liquidity and mixed economic signals suggest selective engagement—favor names with structural tailwinds.

Upcoming Economic and Trading Events

  • May 21 — $16B 20-Yr Treasury Auction: 1:00 PM ET —Bullish: strong bids ease yields; Bearish: weak demand lifts yields.
  • May 22 — Initial Jobless Claims: 8:30 AM ET —Bullish: claims below 225K signal labor strength; Bearish: surprise uptick signals slowdown.
  • May 22 — Flash PMIs (S&P): 9:45 AM ET —Bullish: composite >50.5 for expansion; Bearish: sub-50 print warns contraction.
  • May 22 — Existing-Home Sales: 10:00 AM ET —Bullish: rebound above 4.0M SAAR; Bearish: decline underscores housing cool.
  • May 23 — New-Home Sales: 10:00 AM ET —Bullish: SAAR >705K; Bearish: miss suggests broader consumer pullback.

Earlier this week, Fed speakers dominated headlines with a dovish tilt, which supported futures; retail sales underperformance briefly pressured sentiment before tech earnings relief.

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.
  • Fade at Major MAs: Look for short entries on rally into 200 EMA or 50 EMA with confirming sell flow.
  • Session Open Focus: Prioritize 9:30–10:00 ET volume spikes for high‑probability momentum rides.
  • Use a Virtual Private Server: with QuantVPS, you can execute trades with a 1ms latency. Sign up here!

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.

Rally, Sell-Off, or Neutral Justifications

  • Rally Drivers: Strong earnings, dovish Fed stance, retail surprise beats, and positive global risk catalysts.
  • Sell-Off Triggers: Inflation surprises, hawkish Fed comments, credit rating concerns, and economic data misses.
  • Neutral Factors: Mixed macro prints, range-bound technicals, and seasonal quiet ahead of major data releases.

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