After 4 Deep Red Days, Is SPX Ready To Bounce?

SPX Faces Heavy Selling but Finds Key Support

Author

Market Maverick
February 25, 2025

Market Recap: SPX Faces Heavy Selling but Finds Key Support

Since the January 13th low, and more acutely since February 7th, ES had been in a buy dips mode, where every decline was promptly bought. The pattern continued until last Friday, when ES finally lost a significant, well-defended support level at 6123-6116, triggering a deeper selloff.

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Last Friday, ES posted its first open-to-close red trend day since February 9th, breaking below the key 6116-23 support zone and selling down to 5996 on Monday. Bulls attempted a relief bounce off 5996, rallying 50 points before failing, allowing bears to push lower again today. Yesterday, I outlined the bear case: "Bear case tomorrow: Begins below 5982…. Ideally, I’d want to see a bounce/failed breakdown attempt at 5982. After this, one can short below wherever the lows are. There is also a far more aggressive short available on the failure of 5996."

This morning, ES lost 5982, triggering a deep 50-point “elevator down” sell. However, as readers know, these sharp declines are often followed by violent short squeezes, driven by my core setup: The Failed Breakdown. I wrote yesterday: "5934 is below 5982. I like this level better, particularly if we can put in a Failed Breakdown of the February 2nd multi-week low at 5935." At 10:30 AM, ES tagged 5933, putting in a massive Failed Breakdown, setting off a powerful squeeze.

Can SPX Bounce from Here?

After four consecutive red days, ES has hit this type of oversold condition for the second time this year. In today’s issue, I’ll cover:

  • A deep dive into the setups that caused Friday’s and Monday’s weakness, primarily a combination of Back-Test Shorts and Breakdown Shorts.

  • A breakdown of today’s Failed Breakdown setup, which triggered the sharp short squeeze.

  • The actionable trade plan for tomorrow, focusing on whether SPX is primed for a meaningful bounce or further downside.

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Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult a financial advisor before making investment decisions.