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)