Will Today's Mini SPX Bounce Get Sold Like All The Others? Dec 31st Plan
This holiday trading period was all about a singular level: 6100. I try to stress in this newsletter that trading is not about predicting what price will do, but rather about about deriving critical zones that will produce actionable reactions. Most weeks have 1 or 2 levels that drive most the action, and if you can find them, you own the week. 6100 was the zone we broke down after FOMC on December 18th. Therefore - like most major breakdown zones - I was looking for two things there last week.
1. A rally to back-test it. Its why I wrote back on December 20th: “My general lean is that ES can make its way up to the back-test of 6099”. We rallied over 100 points there by Christmas Eve/Christmas Day.
2. A selloff there. Its why I wrote Tuesday December 24th: “The obvious zone to try shorts would be the 6098 major backtest zone to grab some points.” We sold hard in particular on Friday off this back-test, but for those who missed the 6100 or so short, we had built a nice support shelf at 6066-70 on last Monday/Tuesday which would serve as a spot to add shorts, and I wrote Thursday at 4pm “the fail of 6066 could give us a good sell”. By holding 6100, bears retained control from FOMC Day.
What we saw Friday was an unusually deep, 95 point vertical holiday sell. After a relief pop late day Friday, it continued into this morning. I wrote Friday at 4pm: “If 5986 fails, we will sell hard again like today. I’m generally not interested in longs again until 5942 from there.” By the open today, we had sold into 5942, then deeper into 5920s.
We remain in “sell the bounce” mode. Will this today’s afternoon bounce get sold too? In today’s newsletter I’ll talk this, I’ll do a deep dive into my secondary setup type (the Back-Test) as it what ultimately drove last weeks weakness. You’ll need to know this if we get a bear market in 2025. Finally, I’ll discuss the actionable plan for tomorrow.