Daily Commentary: January 27, 2025

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This Is the Drop I Was Looking For

Posted by Pete Stolcers on January 27
www.oneoption.com

China’s AI news story is an excuse. It’s not why the market is going down.

PRE-OPEN MARKET COMMENTS MONDAY – OMG, why’s the market down? I have been urging you to go to cash and to just stick to day trades for the last few days. The new high last week was all “fluff” and the warning signs have been building for months.

Fundamental Issues:

  1. The second largest economy in the world (China) has rapid economic deterioration.
  2. It has been the world’s economic growth engine for decades.
  3. Their stimulus program in September did not bear any fruit and a credit crisis is brewing.
  4. Global growth elsewhere has been anemic for years.
  5. Domestic credit card delinquencies have been rising quickly for months.
  6. New home inventories have not been this high since 2007 and builders are slashing prices to no avail.
  7. New car inventories are at record levels.
  8. The Covid-19 stimulus money has run it’s course.
  9. New job openings and planned layoffs are at levels not seen in 8 years (Challenger)
  10. TXN provided soft guidance and that bodes poorly for tech stocks that are reporting this week. (AAPL, TSLA, META and MSFT).
  11. Stock valuations have not been this high since 2000 (tech bubble).
  12. The Fed is only going to cut twice this year (not four times).
  13. Interest rates have been rising.
  14. Trump is going to spark market volatility.

Technical Issues:

  1. The move higher from the summer from 2024 has been very choppy.
  2. The dips are deeper and they are lasting longer.
  3. The market has been making marginal new highs (not explosive highs)
  4. Every move higher has been challenged (retracement).
  5. The volume has been extremely light indicating that Asset Managers are not excited to buy.
  6. The year end rally never materialized.
  7. The upside potential (measure move) was much smaller than the downside risks. Go to cash.
  8. The market started the year off with a downward sloping trading channel.
  9. The market spent a great deal of time below the 50-day MA. That is a sign of “risk off”.
  10. The market tends to rally after the inauguration. This was a very light volume move and it is not a sign of heavy buying.
  11. This last little rally was in all likelihood a “sell the news” event.
  12. The market has taken a number of body blows and now it is ready for a knock out punch.

I’ve been pounding my fist on the table to get your attention since the first week in December. I’ve picked every major market turning point for almost two decades, but I only have documentation for the most recent one. I’m writing my book and I am teaching you how to do this analysis. This isn’t hindsight, this is how we were positioned in the heat of battle. My daily comments, Reddit posts and YouTube videos are proof (dated and time stamped).

This is the beginning of a move lower and this is the technical confirmation I was looking for. We don’t pick market tops. Bull markets die hard. Now it’s time to see how the shorts that have been on your radar perform.

We have major news pending this week. If you’ve been paying attention, you are not running around with your head cut off trying to mitigate losses. I told you the move will come swiftly. It’s nice to watch a storm roll in when you are safe. Let’s be prudent.

There is major news pending this week and we will see some volatility.

Support is at the 50-day MA and resistance is at the all-time high. That high is likely to last for many months.

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