SPX Puts In A Rare Red Day. Will It Get Bought? Jan 27 Plan

NOTE: This is a resend of the newsletter for Monday January 27th, originally sent on Friday at 4pm, for those who did not receive.

While we are only 3 weeks into 2025, ES has already delivered a run that will be difficult to beat: Heading into today, it was 8 days in a row of non-stop upside, totalling ~350 points. As readers know (and as updated clearly at the end of every session), I was in the same long since the 6020 Failed Breakdown Monday evening, and this run will be tough to beat also.

I have frequently said that if there was some school for professional ES traders, the first thing they would teach on Day 1 is that ES is the most structurally bullish market in world, and in the history of the world. Even in deep bear markets, ES does not trend down for long: It sees short, violent flushes that cover lots of ground, but then intersperses those with violent short squeezes, making holding shorts for long nearly impossible. Since I started this newsletter in 2021, I’ve devoted most of it to teaching readers exactly how rallies start, perpetuate, and end in ES (they are perpetuated by my core setup: The Failed Breakdown)

As readers know, this rally started on Monday Jan 13th, when ES tested support of a 2 month long, “megaphone pattern” at 5810. Megaphones fill out by nature, so when when we hit 5810, I knew we would be magnetized to 6200+ megaphone resistance. I wrote last Tuesday January 14th: “My general lean is that a relief bounce leg began on Monday by testing megaphone support, and is underway. This would target 5934-36, 5965, then 6004 if bulls really want to move”. By last Thursday, we got to 6004.

Then this week, its just been a matter of waiting for Failed Breakdowns, and looking higher each day. I wrote this Tuesday at 4pm: “My general lean is always just to defer to the trend until it ends. 6105, 6115, then 6137-45 are next macro targets”. We got to 6137 Wednesday high.

I was then looking for more upside today, writing yesterday at 4pm: “My general lean is always to defer to the trend until evidence tells me otherwise. As long as 6135 holds, ES can build structure to setup 6161, 6172, 6185+”. Today, we got to 6161 before ES finally put in a dip, meaning ES *finally* put in a red day.

The question now is after 2 green weeks in a row, will this red day just get bought, or will ES follow SPX to new ATHs? In today’s newsletter I’ll talk this, I’ll do a deep dive into the Failed Breakdown we saw yesterday morning at 6115 which triggered this most recent leg up. Finally, I’ll dicsuss the actionable trade plan for Monday.