The First Week of 2025 Is Red For SPX. 4 of Last 5 Weeks Are Red. Green Week Next Week? Jan 13 Plan
The first full trading week of 2025 is in the books and its been a continuation of what I’ve called a new “bears control” regime that began on FOMC Day December 18th. On this day, ES broke down a 1.5 week flag, putting in the largest red day of the 2024 year, and since then ES has spent nearly all its time trading inside the daily candle of that single session. This new regime would be characterized by two things: 1) Higher volatility, where 50 points today are now what 5 or 10 point moves before and 2) Higher complexity, with ES alternating between elevator down sells, and vicious counter short squeezes which are usually sold eventually due to bears controlling.
In order to survive this action, you need a mastery of what causes both those things (the rapid sells, and the violent counter squeezes). For the latter, it is my core setup: The Failed Breakdown. One week ago today, we had just put in a monster Failed Breakdown of the 5918 level that set the lows last Monday and Tuesday, sold down to 5875 last Thursday, then we recovered it last Thursday around the close to trigger longs. I was looking for a rally to 6070 this week as a result, writing last Friday at 4pm: “My general lean is that ES can try to follow up this rally more. This next leg would target 5997, then 6038, then 6070 if bulls really want to run.” This week the high of week was 6068.25, from which the squeeze was sold - as they usually are - down, which took us all the way back down the 5928-36 zone which had been a stubborn support zone since Tuesday.
It would be the battle line for today and I wrote on in my last newsletter: “Bear case Friday: Begins below 5928” and “Generally its a case of bulls control above 5936 and 5928, and we sell again below”. Bears didn’t waste anytime this morning, and we lost 5928 after the jobs report to sell.
I concluded my newsletter yesterday by stating: “If 5928 fails, the rally is over again, and we make another low.” We did just this and made a fresh new low to 5850ish today. The first week of 2025 has closed red. After 4 of the last 5 weeks red though, can next week go green? In todays newsletter I’ll talk this, I’ll do a deep dive into some of the action we had at the 5928-35 zone this week as we saw a great example of my core setup (the Failed Breakdown) there on Wednesday, and its failure today flushed us down. Finally I’ll discuss the actionable trade plan for Monday.