Is The Relief Bounce In SPX Over? Jan 7th Plan
2024 ended and 2025 began on a rare note: 5 red days in a row (4 of which were the final trading days of 2024), making it the worst end to a year for SPX since 1966, and for the 2024 year ES only saw more than 5 red days in a row on two occasions. After 5 red days in a row, I entitled my newsletter last Thursday 2025 Ends The Way It Started: Red. Is a Relief Bounce Coming? The answer for Friday was yes.
As I’ve discussed at length most new traders have a very wrong idea about how downtrending markets work in ES. They are not smooth lines, but rather punctuated by short squeezes of a vicious nature often every day or two, sometimes sooner. Its why on Thursday, I was looking for a short squeeze. Short Squeezes are always triggered by my core setup: The Failed Breakdown.
I wrote on Thursday 4pm: If I had to throw [my lean] out there, its that after 5 big red days, ES can try to recover the 5918-22 zone and put in a rally to 5951, 5973, 5988+”. Right after my Thursday newsletter was sent out, we recovered 5918-22 (which was a major support shelf from Monday-Thursday which lost Thursday afternoon to 5875 in a massive bear trap), longs triggered, and we began the short squeeze to 5988+ target.
Today, I was looking for ES to follow up on Friday’s green day, given the powerful long triggered we had on Friday and the broader context of 5 prior red days in a row. I wrote Friday at 4pm: “My general lean is that ES can try to follow up this rally more given this was the 1st green day in 6. Bulls want to hold 5918-23 lowest on any Monday dips (ideally though, we go no lower than 5965), and this next leg would target 5997, then 6038, then 6070 if bulls really want to run.” We got to 6068.50 high of day today then sold.
Is the relief bounce done now? In today’s newsletter I’ll talk this, I’ll do a deep dive into the long setup that triggered Thursdays squeeze (you’ll need to know this setup if we get a sustained downtrend). Finally, I’ll disuss the actionable trade plan for Tuesday.