SPX Snaps A 5 Red Day Streak. Does This Bounce Have Legs? Jan 6 Plan

Today, we got the expected short squeeze, and bulls earned it. As discussed yesterday, the last four days of 2024 and first of 2025 were significant: ES closed off 2024 with four red days in a row, the worst end to a year since 1966. It started 2025 adding a red day to that streak, bringing it to 5, a rare occurence in itself only occuring 2x in the entire 2024 year.

Of course though, with 5 red days in a row, ES was due for a squeeze and the setup was there. I wrote on Tuesday at 4pm: “Possible zones for high risk knife catches though would be 5870-75”. We set the low of day yesterday exactly here. Then for today, my lean was that ES could recover 5918-22 (which had been a major bull/bear line all week), trigger longs, and put in a green day. I wrote at the conclusion of my newsletter yesterday: “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+”. This played out to perfection. We got to work on this right after the close last night, and rallied to 5988+ today. This was a clean, fully telegraphed in advance long.

After snapping a 5 day losing streak and putting in a green day, the question is does this bounce have more green days left in it? In today’s newsletter I’ll talk this, I’ll do a deep dive into some of the action we had at 5918-22 yesterday/today as its been a goldmine, in particular for my core setup: The Failed Breakdown. Finally, I’ll discuss the actionable trade plan for Monday.