Welcome to this week’s edition of Your Next Trade! We have plenty to discuss, including retail traders’ aggressive market participation, sector performances, key earnings reactions, and upcoming market catalysts.

Retail Traders Driving Market Moves

Retail traders have been increasingly aggressive in buying dips, leveraging options, and treating the market like a casino. The past two weeks have seen significant retail buying, especially after sharp market dips. This aggressive buying has been fueled by access to leverage products like options and futures, particularly through platforms such as Robinhood.

Robinhood Traders getting access to Futures.

While this creates opportunities for seasoned traders, it also increases market volatility. As history shows, 90% of retail traders tend to lose money in such environments.

Market Performance Overview

Equities:

• The S&P 500 is up 2.5% YTD.
• NASDAQ Tech is underperforming and up +1.1%.
• European markets remain strong, driven by optimism around China and hopes for a resolution to the Ukraine conflict with Euro Stoxx 50 +8.8% and the German DAX +9.4% ytd.

Currencies & Crypto:

• The U.S. dollar is relatively flat, while the Japanese yen has strengthened due to falling U.S. bond yields and comments from the Bank of Japan.
• Crypto markets have shown signs of weakness, with Ethereum down 20% and Bitcoin down 6%, signaling cracks in the risk-on sentiment.

  

  YTD Asset Classes Performances.

Sector Highlights:

• Gold miners & social media stocks are among the top performers.
• Homebuilders are weakening, raising concerns about the U.S. housing market.
• Financials & healthcare remain strong, while technology stocks struggle to push the market higher.

  

  YTD Industries Performances.

Rates, Volatility & Key Indicators

• U.S. 10-year Treasury yield has dropped to 4.5%, down from 4.8% recently.
• Fed Rate Expectations: Market pricing suggests 1.5 rate cuts (or -0.36%) in 2025, a more hawkish stance due to strong economic data.
• VIX remains low (15-17%), but the pattern of volatility compression before macro events continues, creating sudden spikes post-announcement.

Earnings Season Takeaways

• Companies missing earnings expectations have been severely punished (e.g., ELF & BILL plummeted after poor reports).

  

  Negative Share Price reactions to EPS misses have been greater than average this reporting season. (Source: Barclays)

• Concentration in mega-cap stocks continues, with names like Meta up 15 sessions in a row, while other FAANG names saw mixed reactions.
• Retail traders are heavily concentrated in options trading on specific stocks, causing significant post-earnings swings.

Upcoming Catalysts to Watch

This week brings crucial macroeconomic events that could shape market direction:

• Inflation Reports: CPI & PPI will provide key insights into price pressures.
• Retail Sales Data: Will give a clearer picture of consumer spending trends.
• Key Earnings: McDonald’s, Shopify, Reddit, Coinbase, and Moderna.

  

   

• Federal Reserve Commentary: Powell is set to speak, potentially influencing rate expectations.
• Bond Auctions: Over $100 billion in bond supply hitting the market could impact yields.

  

War in Ukraine & Market Sentiment

• European markets are rallying on speculation of an imminent resolution to the Ukraine war.
• A specialized Ukraine Recovery Stock Basket is up 4.2% over five days, significantly outperforming the broader European index.
• However, the potential upside from this narrative may now be largely priced in.

Join Our Upcoming Webinar: Options Trading 101

📅 Saturday, February 15
⏰ 2 PM London / 9 AM New York
💡 Learn how to avoid the top 5 rookie mistakes in options trading and participate in an interactive Q&A session.

Register here: https://us02web.zoom.us/webinar/register/WN_6p1Sl0tMS8m8A6x1ytnazA

Join Our Trading Community

🚀 We’ve launched a Discord community for traders looking for deeper insights, trade ideas, and mentorship!
💰 Subscription: $74.99/month
📊 Get access to 30+ channels, professional research, trade ideas, and direct mentoring.

For more information: https://duponttrading.com/community/

📩 Questions? Contact us at Greg@duponttrading for mentorship, research, or our exclusive 4×4 Video Series.

Have a good Trading Week!

Greg