[COPY] Market Analysis and Trades for 12/31 and 1/2
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The 2026 Equity Markets Year Ahead can be watched here: 2026 Equity Markets Year Ahead
The weekly post for SPY 0.00%↑ and QQQ 0.00%↑ should be reviewed prior to this. It can be found here Market Analysis for the Week of 12/28
ES and NQ went absolutely nowhere today as today was an inside day. That said, it was an absolutely amazing day for rotational trading which is exactly what the plan called for. Either NQ or ES could have been traded the same way with NQ of course offering better range. A lot of traders get chopped up trading these kind of days. If you have subscribed long enough (or are in Discord and have watched the course video on rotational trading) then you were set up for success. The setup for tomorrow and Friday is amazing, and will set the tone for the first move of 2026.
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I will send out a separate post, but prices (TO NEW SUBSCRIBERS ONLY) will be increasing next week. This will apply both the Discord option (which now includes an entire course set) and the Substack option. The Trading Doggy Style Courses will also increase in price. Lock in current pricing ahead of time.
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Levels - Note not all weekly levels will be used each day but they could all present as part of an “active sequence” within a given day(s). Make sure you have added the levels from the weekly plan to your chart
Grab the PharmD_KS indicator linked in the weekly plan or in the dedicated discord room if you haven’t.
ES levels to add/keep/change for the daily levels section
6973-6974
6961.5-6962.5 monitor for LAAF
6940.75-6942.25 monitor for LBAF
NQ Levels to add/keep/change for the daily levels section
25860
25819
25793.75 monitor for LAAF
25648 monitor for LBAF
COMMENTARY:
Since this plan will cover two trading days (I’ll be out of town with the family for the holiday) I’ll put a little extra into it but with the way the week has shaped up thus far it is really incredibly straightforward. We saw today was an inside day with perfect rotational trading across the expected edges. Therefore, those edges haven’t changed a ton. However, tomorrow has a higher-than-normal probability of being an outside day (take out both today’s low and today’s high- not necessarily in that order).
To reiterate the edges:
NQ: The full cash hours range of this week (the extremes) is 25648-25819. The effective upper edge has been caught very nicely by the weekly 781-791 level, and the effective lower edge by the 669-774 level. The weekly 724-745 level sits in a HVN for this week which generally means it isn’t a great area to execute, though sellers controlled it this afternoon (this may be important - see below).
ES: The full cash hours range of this week (the extremes) is 6936-6967.75, caught nicely by the weekly levels. For the effective lower edge I’ll use today’s 6940.75-6942.25 inclusive of today’s low and for the upper edge let’s tweak it to 6961.5-6962.5 which captures today’s high and yesterday’s afternoon rally high (ARH). The weekly 52-55 level sits in a HVN for this week which generally means it isn’t a great area to execute, though sellers controlled it this afternoon (this may be important - see below).
The fact that sellers took control of 52-55 ES and 724-745 NQ might be suggestive that a clean break to the downside is in order, but with participation as low as it has been I’ll assume nothing. Ultimately this range will break one way or another and it will be key to determining the first move of 2026.
Keep in mind that price can trade past an edge but at this point buyers or sellers MUST form a unique and separate distribution or face reversion back into and across the range. I’ll use the ES weekly developing profile to illustrate but the situation is identical on NQ:
I’ve marked this week’s RTH range in white and the effective edges in purple.
Here is what MUST happen for a break to sustain. I’ll use a downside break as an example since we are currently trading near the lower edge but the same applies to an upside break:
The specific location doesn’t quite matter as much as the fact that volume must build completely outside the current range of the week. Anything else will very likely result in reversion back into this range and likely to the other side. So, a failed break of 40-42 (even if it takes out 36 first) will come back to 52-55 and likely find 61-62. Similarly, a failed break of 61-62 (even if it takes out 68 first) will come back to 52-55 and likely find 40-42.
Because of this the trades are extremely straightforward and nearly identical to today. I do suspect we break today’s range as another inside day would be pretty crazy (but not impossible).
To put it into words:
Short a LAAF of 6961.5-6962.5 (regardless of whether or not it takes out 67.75)
Long a LBAF of 6940.75-6942.25 (regardless of whether or not it takes out 36).
Long a sustained breakout above at least 6961.5-6962.5 but really 6967.75. We just have to be REALLY careful of failed breakouts.
Short a sustained breakdown below at least 6940.75-6942.25 but really 6936. We just have to be REALLY careful of failed breakdowns.
Outside of that, again, we can be long an uptrend coming off range low or short a downtrend coming off range high. I much prefer to be in a trade short on the way down or long on the way up into a breakdown/breakout because then a failed break doesn’t take my position red.
For NQ it is exactly the same.
Long a LBAF of 25669-25674 (regardless of whether or not it takes out 25648)
Short a LAAF of 781-791 but ideally 793.75
Long a sustained breakout above 793.75 but really 819 (same cautions)
Short a sustained breakdown below 25669 but really 648 (same cautions)
Because of the NQ proximity to the 600-628 RTH gap I would be extremely careful initiating short anywhere near there. I would much rather be short from higher with profits locked.
The failed breakout trades are absolute A+ trades. The breakout and breakdown I rate significantly lower because of the risk of getting trapped by a failed breakout
Lastly, I always reiterate: A failed break or a break is always more meaningful during cash hours. It can absolutely still play overnight and work great, but I would say US Cash > Europe > Asia in terms the kind of follow through is likely and the credibility I will assign it. The JPM quarterly roll is tomorrow and even though they attempt to execute it with minimal delta impact to the market, we could also have some last-minute end of year rebalancing and both of those into a low volume and relatively illiquid order book. I would be selective and be ready for anything.