The New Year Relief Bounce Is SPX Has Been Sold. Now What? Jan 8th Plan
On December 18th 2024 (FOMC Day) ES broke down a 1.5 week flag, put in the biggest red day of 2024 and markets entered a new high volatility phase that has persisted since. There have been massive, bi-directional swings and as I’ve said frequently, 50 point moves are now as frequent as 10 point moves were prior to December 18th. We are seeing multiple 50 point swings each day now.
Generally though, bears have controlled since late December with ES closing 2024 and opening 2025 with a staggering 5 red days in a row including the 1st day of 2025. Due to this, I was looking for a relief rally to commence, starting Thursday at 4pm when I wrote: “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 5973, 5988+”. The setup which started this was my core setup: A massive Failed Breakdown of the 5918 support shelf which was critical all last week (we flushed it down to 5875 Thursday and recovered). We hit 5988 by Friday’s close to break the 5 day red streak.
Then to start this week - with the above mentioned Failed Breakdown propelling price, I was looking for price to follow this up, writing 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…This next leg would target 5997, then 6038, then 6070 if bulls really want to run.” We hit 6070 yesterday, and ES managed to string together two green days in a row.
Bulls were unable to follow this up for a third day, however. I wrote yesterday: “Bear case tomorrow: Begins on the failure of 5997” and after a good pop to start the session to 6043, ES lost 5997 to trigger down.
The New Year bounce was sold for today, but ES remains quite abit off the lows still. Will we re-test them? today’s newsletter I’ll talk this, I’ll do a deep into my trailing stop methodology (in relation to how it kept me onboard for the 100+ point long we ended last week and started this week with). Finally, I’ll discuss the actionable trade plan for tomorrow.