[Updated] Holiday Trading Starts Tomorrow for SPX. Is More Upside Ahead? Dec 26 Trade Plan

NOTE: Due to the holidays this newsletter is identical to the one sent out yesterday December 23rd, *except I have updated just the trade plan to incorporate today’s (December 24ths) action, and provide fresh entries for the next session which is Thursday*. This newsletter is therefore for Thursday December 26.

Last week was the final “normal” week of trading in 2024, with this week being interspersed with two holiday trading sessions, with the rest being lighter volume. However last week was far from normal, being one of the more volatile weeks of 2024. On Wednesday last week, we got the biggest FOMC day sell in the history of the S&P 500 and the largest red day of the year. This sell was triggered by ES breaking down 1.5 week base at 6105, and I prepared readers for this last Tuesday at 4pm writing: “Bear case tomorrow: Begins on the fail of 6105”.

This was just start of the wild swings though, and this sell ultimately took us down to 5858-66 major support on Friday morning. This then followed up with what was arguably the most violent short squeeze of 2024, rallying nearly 200 points on Friday in the span of a few hours. Readers were well prepared for this short squeeze, and my entire edge is -in a sense - capturing these. I wrote mid-last week: “The primary thing to be on guard for will be short squeezes… and they are often just as ferocious as the leg down, but they only occurs when a significant resistance reclaims”.

I also wrote on Thursday at 4pm when ES was 5930s: “If 5927 fails, we should make a new low. Readers will know what setup I’d be tracking here: The Failed Breakdown of Wednesdays 5907 low.” Shortly after the open Friday, we got this massive Failed Breakdown, and the squeeze commenced that ultimately sustained until today.

This weeks plan was clear: I would be holding longs to see if ES can back-test the FOMC breakdown ~6100. I wrote Friday at 4pm: “My general lean is that ES can make its way up to the back-test of 6099. This is in play as long as 5928 lowest holds, but if bulls are very motivated, they won’t even lose 5980. This could see something like pop to 6040s, perhaps dip, then work higher”. This played out incredibly well, and we rallied to 6040s, reacted, then worked higher. This was one of the largest longs of 2024.

Tomorrow is a half day, Wednesday is a day off, then Thursday-Friday are regular. This is the traditional seasonal Santa Rally phase (last 5 trading days of the year and first two trading days of the next). Will it show up? In today’s newsletter I’ll talk this, I’ll discuss the cause of Friday’s short squeeze (its essential to know this). Finally I’ll talk the actionable plan for tomorrow/Thursday.