Daily Bullish Hammer Candle For SPX. Will Bulls Drop The Ball Again? Jan 14 Plan
2025 started much the same way it ended: With bears in control and as discussed at length Decemeber 18th (FOMC Day) was perhaps the most important day for markets in over a year as it brought about a regime from a low volatility, bulls control regime, to high volatility, bears control regime. Since then ES has cycled between vicious, “elevator down” sells and equally vicious counter short squeezes, but the commonality has been that all bounces have been sold since December 18th. Today, we got another one of these squeezes.
The result of this is that 4 of the last 5 weeks since December 18th have been red. The latest leg down occurred on Friday, with NFP report as the catalyst. I wrote on Thursday at 4pm: “Bear case Friday: Begins below 5928” and “Generally its a case of bulls control above 5936 and 5928, and we sell again below”. The 5936-5928 zone had been a major support shelf from Tuesday through Friday last week. We lost it Friday morning, and sold into this mornings low of 5809.
Heading into today - and as discussed above - ES tends to cycle between ‘elevator down sells’ (Friday) and short squeezes. Therefore, a short squeeze was likely. I wrote on Friday at 4pm: “If I had to give a general lean its that ES can test the lows (perhaps down to megaphone support 5828-31) then try another squeeze”. Last evening, ES sold off down to 5828-31 by 830PM, bounced there exactly, lost it overnight down to 5809, then it became a magnet this morning, which we built structure around to load up energy for a squeeze. We got the squeeze into the close
The end result of this action is that ES put in a daily hammer candle. After 3 days of selling, is it ready to bounce, or is this another trap? In today’s newsletter I’ll talk this, I’ll do a deep dive into the short setup we had on Friday as it was a clear example of my third and most difficult setup type: The Breakdown Short, and produced an 85+ point sell. Finally, I’ll discuss the actionable trade plan for tomorrow.