Market Analysis for 1/8/25

SPY QQQ

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The weekly post for SPY 0.00%↑ and QQQ 0.00%↑ should be reviewed prior to this. Link to Market Analysis for The Week Ahead

Be sure you have read the Trading Doggy Style Starter Kit. I will be adding to this over time, likely first focusing on example executions. Trading Doggy Style Starter Kit. A recent update has been made with some additional content.

In the weekly plan, we remained cautious even on a break of last week’s high in spite of the extremely bullish looking weekly hammer. We were monitoring for the potential that prior buyers in this range would take their exits if given the opportunity:

Note the brief excursion above the November 11th high before yesterday’s selling started.

We have not closed above the (declining) 20sma.

For today we were looking to be short below 6028.75, and open to a long above 6028.75-32 at least for a test of 6044.5-6047.5 where caution was warranted. The overnight offered a nice short below 28.75. Late premarket reclaimed it and rallied to 6045.5 at the open where the selling started. The low of the first 30 minutes was 28.5 which made things somewhat unclear. The data at 10:00, however, cleared matters up quite quickly and the rest of the day shorts were generally favored as we traded below Monday’s low.

The back test of yesterday’s low at 11 EST was probably the safest short to take today. It corresponded with the 21 ema on the 5-minute (red) and both the overnight (blue) and RTH (purple) VWAPs. From there it was a battle between buyers at the IB low and sellers defending yesterday’s low.

Today’s low held Friday’s open on SPX, and on ES it was the RTH low from the 12/18 FOMC day. Neither side has had a ton of success breaking away from the 12/18 range though sellers have clearly shown more progress.

There have been a lot of questions regarding the prediction I made for the small selloff in December followed by a larger selloff starting January 7th. Even if this ends up exactly right, I still hold that predictions are generally worthless and it is better to continuously evaluate and respond to market conditions. Making this prediction changed nothing for me during the last month. We have been shorting the highs and covering the lows because that is what the action has dictated, not because of a silly prediction.

That said, I will find some time in the near future to explain this prediction whether or not we see continued selling from here. I don’t care whether I am right or wrong in a prediction as long as I am on the right side of the trade.