Market Turmoil: Hot Services Prices Trigger Sharp Selloff in E-mini Futures

An abbreviated trading schedule for tomorrow will go out shortly. Tomorrow’s Morning Express may only have updated levels and video.

E-mini S&P (March) / E-mini NQ (March)

S&P, yesterday’s close: Settled at 5954.25, down 66.25

NQ, yesterday’s close: Settled at 21,359.75, down 384.75

E-mini S&P and E-mini NQ futures finished sharply lower on Tuesday but off the worst levels. This was exactly what we feared, with a negative near-term technical setup from Monday’s tail and hotter than expected Services Prices being the culprits.

After a strong finish to last week, additional bullish tailwinds came from the Washington Post article Monday morning tossing around the idea of a less severe approach to tariffs by the Trump administration. After Trump himself walked it back, price action across the indices failed at overhead supply and left an unenthusiastic tail. It is important to understand that this breeds a negative market profile in the near-term, opening the door for sellers. 

And that it did upon yesterday’s ISM Services PMI release. The headline read was only slightly hotter at 54.1 versus 53.5, but it was Prices paid that expanded at 64.4, the fastest pace since February 2023. Above 50.0 means expansion, and below is a contraction. While headline Services PMI has contracted as recently as June, Prices have expanded each month since May 2017. Furthermore, this was the first read on Prices above 60 since January 2024. On the one hand, this illuminates our services-driven economy and signals that there is no slowdown in sight. On the other hand, we may have an extremely hot outlier consistently showing up at the start of the year. Regardless, in the near-term, coupled with a hot JOLTS read hitting a five-month high, the 10-year Note yield to 4.72%, the highest since 4.74% in April. At a minimum, yields remaining at this elevated level will start to forge a valuation revision.

This morning ADP Payrolls, the first look at December jobs data, came in at 122k versus 139k expected. This, coupled with dovish comments from Fed Governor Waller, has helped soothe an early risk-off tone after Trump again spoke on tariffs this morning. However, Initial Jobless Claims came in lower at 201k, the lowest since January 18th. At that time, I tweeted, “It’s not ironic that Jobless Claims at 187k is the best since last Jan. Going out on a limb here, but this is the best read for months to come.” Today I quote tweeted that with, “Jobless Claims at 201k this AM maybe not the low just yet, but you get the point and only one more read before Biden admin out of office, just saying.”

E-mini S&P and E-mini NQ futures are coming off their worst levels of the session. While major three-star support in the E-mini S&P at 5934-5938.25 held perfectly yesterday, it was violated briefly this morning; we still find this level to be significant. If we see steady price action below here and 21,261-21,298 in the E-mini NQ, we have another major three-star support just below that we believe to be a bit more significant. However, a break below there takes us back to last week’s lows and introduces a critical situation. To the upside, in order to begin repair, we must see a close back above major three-star support in the E-mini…

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