MES: Ice and Fire Could Blow the U.S. Economy Off its CourseCME: Micro E-Mini S&P 500 Futures ( CME_MINI:MES1! ) #Microfutures
In “A Song of Ice and Fire”, American author George Martin painted a mystical land where dragons spit out flame to destroy a whole city and a winter that last one hundred years. Game of Thrones, the popular HBO TV series, was adapted from Martin’s book.
In 2025, we seem to be reliving these moments. California wildfires have claimed dozens of lives, burnt down thousands of homes, and caused an estimated $250 billion in damage.
Meanwhile, Winter Storm Blair raged coast-to-coast, bringing heavy snow across the Great Plain to Mid-Atlantic. The storms shut down interstate highways, caused thousands of airport delays and racked up 350,000 power outages. At the time of this writing, Polar Vortex is bringing freezing temperature back to the lower 48 states.
These weather perils are very destructive. In my opinion, the forces of nature could cause real damage to the entire U.S. economy.
Firstly, we could see a rebound in inflation
The Bureau of Statistics (BLS) reported that US CPI increased 0.4% in December and went up 2.9% year-over-year (YoY). Of which, the energy index decreased 0.5% YoY with energy commodities gasoline and fuel oil falling 3.4% and 13.1%, respectively. In contrast, energy services such as electricity increased 2.8% and natural gas (piped) rose 4.9% YoY.
The chart shows a correlation between CPI and natural gas prices. The underlying logic is the U.S. economic reliance on natural gas. According to the Energy Information Administration (EIA), about 43.1% of the electricity in the country was generated by natural gas.
In “Nat Gas: Trading the Weather”, I explained how cold temperatures increase natural gas demand for generating electricity and heating up homes.
Higher natural gas prices affect not just the storm-hit regions, the entire country also bears a higher cost for energy services. Larger utility bills raise the cost of producing and distributing all goods and services.
A leading indicator: When natural gas prices rise, inflation will likely go up.
Conclusion: As natural gas went up sharply, we could expect a higher CPI for January.
Secondly, we could see economic slowdown and higher unemployment
Many businesses in the passage of winter storms suffered loss of sales. People in parts of Los Angles were evacuated. The total cost for insurance payout, loss of revenue, debris cleanup and rebuilding amounts to hundreds of billions of dollars. Total US GDP was $28 trillion last year, or about $2.3 trillion per month. A quick calculation shows that the weather perils could shave off 1/10th of the US national output for the month of January!
Many S&P 500 companies are based in California or in the storm-hit regions. The actual damage to them will be revealed when they report quarterly earnings in April and May. The Bureau of Economic Analysis will report Q1 GDP on April 30th.
US unemployment has been on the rise since mid-2023. In my opinion, the A.I. driven technological revolution is responsible for many High-Tech layoffs. On January 10th, the BLS released its nonfarm payroll report and showed that unemployment in the Information sector was 98,000 in December 2024, up from 86,000 a year ago.
December is the busiest month for the Retail sector. However, retailers report total unemployment of 897,000 for the month, up 87,000 or 11% from December 2023.
When the BLS updates its payroll report in January, I expect to see higher unemployment data. The month-to-month data could be even worse, as January is usually a slow month after the December holiday season. In addition, winter storms and wildfires would push more businesses to shut down and lay off employees.
Finally, the uncertainty around economic policies under the new administration
I expect President Trump to raise “ice and fire” on his own. If his first term is any guide, we would see plenty of drastic policy changes impacting various industries. Uncertainties are not well embraced in the world of investment. Any new policy initiative could bring the market to chaos when the news breaks, regardless of its long-term effect.
During the first term, important policies (such as new tariff) were usually announced from Twitter tweets. This time around, they would likely come out of Truth Social tweets.
Trading with Micro E-Mini S&P 500 Futures
In my opinion, the U.S. stock market will face more volatility in the coming months. Key economic data could be disappointing for investors.
• When the January nonfarm payroll report is released on February 7th, monthly employment data could trend lower, while unemployment rate ticks up. Signals of economic weakness could send the stock market lower.
• When the January CPI data is released on February 12th, the headline inflation could move higher. If this is the case, the Fed is less likely to lower interest rates. The stock market will face downward pressure.
• The Fed will meet on January 29th. According to CME Group FedWatch Tool, the futures market prices a Fed decision of no-change at 97.9%. However, the market consensus shows that Fed Funds rates could drop to 3.25-4.00% by December, indicating 1-4 rate cuts in 2025. The Fed has not committed to any further rate cut.
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Given these scenarios, a trader could explore short-term opportunities by shorting the S&P 500 prior to the Big Report Dates.
The CFTC Commitment of Traders report provides further support to this thinking. The latest data shows that, as of January 14th, Leverage Funds hold 151,543 long positions and 448,908 short positions for E-Mini S&P 500 futures.
Despite the S&P nearing its all-time high, “Smart Money” already turns bearish. Shorts outweigh longs by a 3-to-1 ratio.
• They are also bearish on Nasdaq 100, by a 1:2 long-short ratio (43,254 vs. 82,724)
• This contrasts with the Dow contracts sharply. Leverage funds own Micro Dow by a 3:2 long-short ratio (17,591 vs. 10,051) during the same period.
The MES contracts offer smaller-sized versions of CME Group’s benchmark S&P 500 futures (ES) contracts. Micro futures have a contract size of $5 times the S&P 500 index, which is 1/10th of the E-Mini contract.
Micro contracts are very liquid. CME Group data shows that 1,095,979 contracts were traded on Thursday, January 16th. Open Interest at the end of the day was 129,228.
Buying or selling 1 MES contract requires an initial margin of $1,525. With Friday closing price of 6,040, each March contract (MESH5) has a notional value of $30,200. Compared with investing in stocks, the futures contracts offer a built-in leverage of about 20 times (=30200/1525).
Hypothetically, if S&P futures price falls 10% to 5,436, the price change of 604 points (6,040-5,436) will translate into $3,020 in profit for a short position, given each index point equal to $5 for the Micro contract. Using the initial margin of $1,525 as a cost base, the trade would produce a theoretical return of 198% (=3020/1525).
The risk to short Micro S&P is that the US stock market continues its spectacular rally. To limit the downside risk, a trader could set up a stop-loss when entering a short position.
For illustration, a short trade executed at 6,040 could be combined with a 6,200 stop. If the S&P goes up to 6,500, the trader’s position would be liquidated well before that. The maximum loss would be $800 (= (6200-6040) * $5).
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
ES1! trade ideas
#ES_F Day Trading Prep Week 1.20 - 1.24Market closed outside of Value after failing under 6074 - 54 HTF Edge.
We are set to open inside 6064 - 23 Intraday Range unless market gaps under/over after Mondays Holiday but if we open inside it then that tells us we are over Value and there are two thing we can do here, continue grinding/balancing inside the Intraday Range and try to push towards/into above Edge ?
Or do we find more selling over Value that would bring us back into/under VAH, if we get under VAH we would be under Daily Stops so that could trigger moves towards the Mean/VAL of the range. If we do get back inside the Value we could find support and holds around it BUT careful if we take out out and get under Value, that can bring in more weakness for lower targets where we would watch for any continuation.
IF the strength from last week stays, for us to see any bigger prices out of this HTF Range we would need to hold over VAH and have a strong push into or over the above Edge that would stay over, until then we have December supply trapped over 6050 - 74 so we may stay under this area and most of December Supply is valued over 930 - 70s and we have January month end approaching which means if more size needs to lighten the bag that could trigger some lower destinations.
ES Futures -
ES Futures Current week Plan ( 19 - Jan -2025 )
ES is currently making HH and HL , I am currently watching for a potential BID Spots .
1st zone - Break and retest of previous High + 50 DMA + Trend line break & retest
2nd zone - PDL sweep + Trend line Support
3rd zone - Break and retest of 14 jan high which is not yet retested
Enter shorts at your own risk and never fight against the trend .
ES Weekly AnalysisPrice ran into previous FVG on Monday 1/13 creating last weeks weekly low.
Price then blew past a FVG that should've kept price lower which led to a break of structure.
This week I'm looking for price to pull back into this FVG and take price up to fill the FVG from 12/18.
I'm looking to enter around 5900 for the buy.
M15 'Real' Market StructureFor those who are interested in what we do inside traderbuddy (besides the 28Dto100K Challenge offcourse).
Here is a markup M15 ES with 'Real' Market Structure.
For clarity, offically we are still in a downtrend on the M15 and waiting to see how it will react to the 'Extreme'
MES!/ES1! Day Trade Plan for 01/17/25MES!/ES1! Day Trade Plan for 01/17/25
📈 6047.25 (NEXT LEVELS: 6066, 6075.5, 6084.75)
📉 5969.75 (CLOSER LEVELS: 6018, 6008.5, 6000)
1/2 way mark 📈 6027.75 & 📉 5989.25
Like and share for more daily ES/NQ levels 🤓📈📉💰
*These levels are derived from comprehensive backtesting and research, demonstrating over 90% accuracy. This statistical foundation suggests that price movements are likely to exceed initial estimates.*
20250117 ESThere was a jigsaw for the AMS. The LOD was made at 4pm. This LOD created the REL. I do not anticipate these REL are to be raided this week.
I would like one more upside subdivision with first d bs level raid. TGIF to start either during AMS sb or PMS Sb. I would like to see ORG as well.
I anticipate some more upside, ideally to see bs raid. Though my main narrative is TGIF. The reversal to the downside is anticipated during AMS SB or PMS SB. I would like to see a clear 2022 model first before making any further judgments. Nevertheless the Wednesday ORG CE level is my -DOL if not for today but for the start of the next week.
ES/SPX Morning Update Jan 17thAt first glance, the market’s final hour yesterday looked bearish. However, for those who dont trade with retail..but trade against retail, things were simple. Just wait for retail to get trapped..aka failed breakdown setups (highlighted in plan for today), it was a clear long opportunity. We dipped below the 5974 and 5966 major zones, trapped shorts as usual, and triggered longs for buyers. Now, just hold runners—no further action needed, approaching our 6016 target. Remember, most professional traders dont trade on Fridays, and i rarely do as well. It's usually just managing runners from Thursday…if i have any. Capital preservation should be your main goal every Friday, with the only set ups being took are textbook failed breakdowns.
Market Outlook for Next Week (US):The upcoming week features key economic data and events that could influence market sentiment and asset prices. Below are the highlights and their potential market implications:
Key Economic Events & Data Releases
Flash PMIs for January (Tuesday, January 23, 2025)
Time: 9:45 AM EST
Expected Data:
Manufacturing PMI: 49.8 (Previous: 49.5)
Services PMI: 51.3 (Previous: 50.9)
If the Manufacturing PMI remains below 50, it will confirm ongoing contraction in the sector. However, an improvement in Services PMI could suggest resilience in the broader economy. Positive surprises in both PMIs may lead to a rally in equities, particularly in cyclical sectors, while disappointing data could weigh on sentiment.
Initial Jobless Claims (Thursday, January 25, 2025)
Time: 8:30 AM EST
Expected Data: Approximately 215,000 (Previous: 212,000)
A low reading would signal continued strength in the labor market, likely reinforcing expectations for the Federal Reserve to maintain higher interest rates for an extended period. This could put downward pressure on equities while supporting bond yields and the US dollar. Conversely, a higher-than-expected figure may ease rate hike fears and support risk assets.
Q4 2024 GDP Advance Estimate (Thursday, January 25, 2025)
Time: 8:30 AM EST
Expected Growth: 2.2% annualized (Previous: 2.5%)
This release will provide insight into the economy’s performance during the final quarter of 2024. A weaker-than-expected GDP figure could fuel concerns about slowing growth and lead to a rally in bonds, while stronger growth may boost risk appetite but could reignite concerns about further Federal Reserve tightening.
Core PCE Price Index (Friday, January 26, 2025)
Time: 8:30 AM EST
Expected Data: +0.2% month-over-month, 3.6% year-over-year (Previous: 3.8%)
As the Federal Reserve’s preferred measure of inflation, this report will be closely monitored. A decline in the year-over-year figure may reduce pressure on the Fed to hike rates further, which could support equity markets and weaken the US dollar. Conversely, persistently high inflation could trigger renewed concerns about policy tightening, potentially weighing on equities.
Consumer Sentiment Index – Final Reading for January (Friday, January 26, 2025)
Time: 10:00 AM EST
Expected Data: 64.8 (Previous: 64.6 preliminary)
Consumer sentiment is a key indicator of household confidence and spending outlooks. An improvement could support consumer-related stocks, while any downward revision might weigh on the market.
Overall Market Implications
Equity markets will likely remain sensitive to any data hinting at changes in economic growth, inflation, or labor market conditions. Positive surprises in growth or inflation cooling could drive risk-on sentiment, while signs of a slowing economy or stubborn inflation might increase market volatility. Bond markets may see notable movement depending on the GDP and Core PCE figures, while the US dollar’s trajectory will largely depend on labor market and inflation data.
Investors should prepare for potential volatility across sectors, particularly in interest rate-sensitive areas like technology and real estate.
MES!/ES1! Day Trade Plan for 01/16/25MES!/ES1! Day Trade Plan for 01/16/25
📈 6060
📉 5940
1/2 way mark 📈 6031 & 📉 5969
Like and share for more daily ES/NQ levels 🤓
*These levels are derived from comprehensive backtesting and research, demonstrating over 90% accuracy. This statistical foundation suggests that price movements are likely to exceed initial estimates.*
OTEUM Expert Call: Intramonth Short to kick start the Year🚀 OTEUM’s Power Play: Kicking off 2025 with an Intramonth Short CME_MINI:ESH2025 !
We’re eyeing a sharp shakeout before Trump takes office, targeting the next daily support levels. Keep an eye on the 6000-6050 value zone for the perfect entry to ride this sell-off wave to next daily supports.
2025-01-16 - priceactiontds - daily update - sp500Good Evening and I hope you are well.
comment: After hours selling was strong, especially on nasdaq. Sp500 is still well above 5950, which is my line in the sand for bulls. Below the odds for the bears increase big time. I still lean bullish for a retest of 6000 and I do think bears need stronger selling (spike + channel) to trap late bulls. Today was a trending trading range where all bars overlapped big time. The odds that we break below such a day after that rally are very low.
current market cycle: trading range (bear channel/wedge on the daily tf)
key levels: 5900 - 6030
bull case: Bulls want to chop around 6000 to find more acceptance and break above the big bear channel. Their next target is the prior high 6068. On the previous short squeeze we melted to 6068, pulled back hard for 60 points and then print a lower high. I still expect bulls to get a lower high closer to 6000, if not the breakout above.
Invalidation is below 5950.
bear case: Bears want to get below 5950 and then test the breakout price of 5918. The 50% retracement is also there at 5913. For now I don’t think today’s price action was that bearish but the after hours selling is weird to say the least. It’s a bad spot for both sides to trade at 5960ish.
Invalidation is above 6020.
short term: Bearish below 5950 and bullish only above 6020. Neutral in between. Again.
medium-long term - Update from 2024-12-22: Ultimately 5200-5300 in 2025. Again, rough guess as of now and since we have not seen a strong first bear leg, these targets are the lowest I am willing to give an honest outlook about. If bears surprise and we see a huge leg down to 5500, we will go much lower for the second and third leg.
current swing trade: None
trade of the day: Shorting 6000 was decent many many times.
SPX Futures in 8H timeframe Hello
According to EW principles, one of the most controversial analysis in the market is to count a corrective waves and it is exactly what is happening for SPX. There are only one more scenario and it is when we count (ABC) down to RED CIRCLE all that happened is considered as wave 1 of 5 (green counting).
I am waiting to see what will happen for out trend when it touched upper boundary of the channel.
In all scenarios this is not the trade time for S&P.
Thanks
ES/SPX Morning Update Jan 16thYesterday, CPI took us up to targets 5965 and 6004, right at a major resistance that held firm overnight. The market remains tricky—consider reducing your position size for today til more setups emerge
As of now:
• 5984 = support; it must hold to keep 6004, 6016, and 6043+ in play
• If 5984 fails, look for a selloff to 5972, then 5952
Risk onThe strong price movement in the Wednesday S&P 500 daily chart Indicates Risk On. This means that capitals flowing to the S&P 500 futures market as a result of fundamental support for that movement. The expectation for Thursday is follow-through to the upside but not the same size of movement seen on Wednesday.
2025-01-15 - priceactiontds - daily update - sp500Good Evening and I hope you are well.
tl;dr
sp500 e-mini futures - Neutral around 6000. Market is close to the daily 20ema, bear trend line and big round number 6000. I won’t even think about longing this but it’s obviously wrong to short too early. As long as bulls keep it above 5950, they are good and in full control of the market. Targets above are 6030 and then 5050. If bulls break above the bear trend line, there aren’t many reasons why we could not just melt to 6100+.
comment: Huge bull day but right at multiple prior resistances. Bad buy no matter how you put it. I would actually not be surprised if we trade below 5950 or lower tomorrow. We have been going wildly up and down in this bear wedge/channel and that pattern is valid until clearly broken.
current market cycle: trading range (bear channel/wedge on the daily tf)
key levels: 5900 - 6030
bull case: Bulls got the big move from the CPI news and they want to test the bear trend line and break above it. It’s just not a good buy and hoping for a breakout. I won’t make stuff up here. If bulls break above 6020, next target is 6068 and then 6100.
Invalidation is below 5795.
bear case: Bears need anything to stop the rally. They have good arguments with the daily ema, bear trend line and big round number 6000. They came around the prior weeks and until that bear trend line is broken, I expect them to keep this a lower high as well. It would be pretty funny if we completely reverse today before we go into the weekend.
Invalidation is above 6030.
short term: Bearish below 5950 and bullish only above 6020. Neutral in between.
medium-long term - Update from 2024-12-22: Ultimately 5200-5300 in 2025. Again, rough guess as of now and since we have not seen a strong first bear leg, these targets are the lowest I am willing to give an honest outlook about. If bears surprise and we see a huge leg down to 5500, we will go much lower for the second and third leg.
current swing trade: None
trade of the day: Buying the double bottom on the 15m chart around 5956 was good.