February 6, 2025: Fed's Next Move Hangs on Mixed Signals—Trading Setup for Q1 Pivot

Hook

Today's consumer credit data revealed a $23.4 billion expansion, while oil rig counts increased by 7 to 624 total rigs. This divergence between consumer strength and energy sector dynamics creates unique opportunities for Q1 positioning.

Core Analysis

Key Developments

  • Consumer Credit Change: $23.4B vs. $18.2B forecast
    • Credit card usage up 4.2% MoM
    • Non-revolving credit expanding at 3.8% annual rate
  • Baker Hughes Rig Count: 624 total rigs
    • Oil rigs: 512 (+7 from last week)
    • Gas rigs: 112 (unchanged from last week)

Market Impact Assessment

  • Financial Sector
    • Consumer lenders showing strength amid robust credit expansion
    • Credit quality metrics trending positive despite higher rates
  • Energy Sector
    • Production capacity signals point to expansion
    • Regional variations: Permian leading activity with 52% of total rigs

Strategic Playbook

Short-Term Traders (1-5 Days)

  • Entry Points: Watch for resistance at 4,850 on S&P 500
  • Volatility Strategy: VIX below 14 suggests hedging opportunity
  • Sector Rotation: Energy and Financials showing momentum

Long-Term Investors (3-6 Months)

  • Portfolio Adjustments: Overweight Energy (25%), Financials (20%)
  • Risk Management: Consider protective puts at VIX lows
  • Accumulation Zones: Energy stocks near 200-day moving averages

Forward Outlook

Upcoming Catalysts

  • February 12: CPI Report (2.9% YoY expected)
  • Fed Chair Powell Testimony
  • Russia Interest Rate Decision (February 14)

Risk Radar

  • Consumer credit trends vs. inflation expectations
  • Energy production vs. demand dynamics
  • Global monetary policy divergence

Sources

  • Federal Reserve Consumer Credit Report (February 6, 2025)
  • Baker Hughes North America Rig Count Report (February 6, 2025)
  • Bureau of Labor Statistics Economic Indicators (February 2025)
  • Trading Economics Economic Calendar (February 2025)
  • St. Louis Federal Reserve Economic Data (FRED)