A Big Green Week For SPX. Now The Big Question. Can It Sustain? Jan 20/21 Plan
One week ago today, my newsletter was entitled: “The First Week of 2025 is Red For SPX. 4 of The Last 5 Weeks Are Red. Green Week Next Week?”. The answer to this, was yes, and it was no surprise why. The reason was twofold. Firstly, after “elevator down” sells like we had last Friday, ES always sees a short squeeze. My edge is trading these squeezes. Secondly though, the location of price made a massive difference here: ES was heading into support of its most singular important chart pattern: A two month, massive, “megaphone” pattern down at 5830ish. Megaphones fill out, and when we hit megaphone support, price will make a break for resistance, which in this case, is much higher at 6270.
We held support on Monday, and were off to the races. I warned everyday afterwards that this rally likely had legs, writing on Tuesday at 4pm (when we were 5880s): “My general lean is that a relief bounce leg began on Monday by testing megaphone support, and is underway. This would target 5917, 5934-36, 5965, then 6004 if bulls really want to move”. By yesterday, we made the the trip to 6004 target before selling into the close to 5960s.
While yesterdays close may have looked “bearish”, readers of this newsletter knew better. I wrote at 4pm yesterday: “For tomorrow, the bull case is that ES is constructing a bull flag (one can see the flag quite clearly containing all todays action). Generally this would mean ES probably goes no deeper than 5966 or 5951. Bulls will want to recover this afternoons 5974 to trigger longs, and this would be an entry I’d be tracking”. At 6pm last night, we got this long trigger. Today’s targets for this long as readers know were 6016, then 6033+ and we got it.
This has been a good week for classical chartists: A macro megaphone to get us long early in the week, and a bull flag to clue us in long last night. However, putting in 1 green week isn’t hard. Sustaining it for bulls, is. Can they do it? In today’s newsletter I’ll talk this, I’ll discuss the setup that got us long last evening in more detail, and do a deep dive into my methodology around runners. Finally, I’ll discuss the actionable trade plan for tomorrow.