TL;DR
• The market defied bearish sentiment after 2025 closed with five straight red days for ES, breaking the typical Santa Rally.
• Yesterday marked a significant turnaround, as ES delivered a powerful green day, snapping its losing streak.
• This rally was no accident; it stemmed from our core "Failed Breakdown" setup, a clear institutional footprint of buying after flushing lows.
• Our predictions played out perfectly from Friday into Monday. Key levels held, shorts were trapped, and ES surged through crucial resistance, hitting 6989.
• The focus now shifts to maintaining this bullish momentum. Bulls must consolidate these gains without a significant retrace, pushing towards our next targets.
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Quickfire Highlights
Friday's 2 PM Squeeze
ES based at 6872-69 then endured a swift flush to 6866, trapping shorts, before reversing for a massive rally.
6943 Defense
Bulls successfully defended the critical 6943-45 zone overnight, fueling the continuation rally to 6989.
The market has decisively shifted gears from the mean-reverting, choppy action that defined the end of 2025 and the very start of January. We are now firmly in a bullish trending regime, marked by strong follow-through after clear institutional buying. The consistent defense of key support zones and aggressive pushes higher indicate buyers are in control, overriding any lingering bearish sentiment.
The Failed Breakdown
This is our core setup, which repeatedly drove the recent rallies. It appears on the chart as ES rapidly flushing a low or a shelf of lows, then springing back up with force. This is a clear indication of stops being run and immediate institutional absorption. Every rally in ES is caused by this institutional buying, and it leaves a distinct footprint on the chart.
Back-Testing Confirmed
We anticipated ES would attempt some back-testing from around current prices, ideally no lower than 6872-69. This played out perfectly on Friday, establishing a solid shelf before the flush and subsequent rip higher, building a strong foundation for the recent move.
The recent bullish action has established crucial support zones. The 6943-45 area is now paramount for bulls to hold; any quick dips to 6925 should be swift reversals if the trend is to remain strong. A more critical line in the sand sits at 6903-05, and its failure would signal a potential revisit to Friday's lows. On the upside, reclaiming 6959 should set the stage for targets at 6970-73 and the psychological 6999 level, with 6989 already achieved.
Our mental framework for tomorrow remains simple: defer to the bullish trend. Bulls want to hold the 6943-45 zone, or if there is a quick trap, a firm recovery from 6925 is essential. From there, look for ES to flag above 6959, aiming for the next leg up to 6970-73, then 6989, and ultimately 6999. Should 6903-05 fail, however, the landscape shifts dramatically, and we would anticipate a revisitation of Friday's lows. Stay nimble, but respect the established momentum.
Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice. Please consult a licensed financial advisor before making investment decisions.