Post NFP push back to highs

Trading notes for 2026-01-12

TL;DR

Attempted to short SPY puts after Friday's NFP-driven all-time highs, expecting a liquidity sweep and reversal lower. The trade failed as the market demonstrated relentless bullish momentum, dropping pre-market Monday only to aggressively push back to highs during NY open. Key lesson: don't fight the Trump administration's bullish macro environment.

Market Context

Friday's Non-Farm Payrolls report provided the liquidity injection that finally pushed the market to new all-time highs. The setup had been building for days with increasingly shallow retracements - each pullback was smaller than the previous one, showing the market was coiling up and repeatedly testing resistance at the ATH level.

The price action was textbook accumulation behavior. Every dip was being bought with conviction, and the successive higher lows created a clear ascending triangle pattern against the all-time high resistance.

Thesis & Plan

My thesis was based on a classic liquidity sweep setup. The plan was to:

• Wait for the market to break through all-time highs on the NFP news
• Enter puts expecting institutional players to sweep the ATH liquidity
• Capitalize on what I anticipated would be a rejection and push lower after the liquidity grab

The reasoning seemed sound at the time - major round number highs often act as magnets for stops and resting orders, creating opportunities for reversals once that liquidity is absorbed.

Entries & Exits

I entered put positions after the Friday ATH break, positioning for the expected reversal. The trade initially showed promise when the market gapped down pre-market on Monday and took out Friday's low.

However, during the New York open session, the market completely reversed character and aggressively pushed back toward the highs, invalidating my bearish thesis.

What Worked / What Didn't

What Didn't Work:

• Fighting the dominant macro trend with a counter-trend trade
• Assuming the ATH break would lead to a meaningful reversal
• Underestimating the strength of buying pressure in this environment
• Not respecting the shallow retracement pattern as a sign of underlying strength

What Worked:

• Correctly identifying the coiling pattern and ATH test setup
• Recognizing the liquidity dynamics around major levels
• The initial read on Monday's pre-market weakness seemed to validate the thesis temporarily

Risk Management

While specific position sizing and stop loss details weren't documented in my notes, the trade was clearly managed as the position was closed when the market showed its true intention during the NY session push back to highs.

The pre-market drop on Monday initially looked like confirmation of the thesis, but the aggressive reversal during regular trading hours provided a clear signal that the trade was wrong and needed to be abandoned.

Lessons Learned

This trade provided several critical insights for future positioning:

Don't Fight the Macro Environment: The Trump administration's policies are creating a persistently bullish backdrop. In this environment, any retracements should be viewed as buying opportunities rather than reversal setups. Fighting this macro trend is like swimming upstream.

Respect Shallow Retracements: When pullbacks keep getting smaller and smaller, it's usually a sign of underlying accumulation and strength, not weakness. The market was telling me it wanted to go higher, but I was looking for it to go lower.

News Liquidity Creates Momentum: NFP-driven moves often have follow-through rather than immediate reversals. The liquidity injection created genuine momentum, not just a technical liquidity grab.

Adapt Strategy to Market Regime: In strongly trending macro environments, counter-trend strategies have lower probability of success. The better approach is to look for continuation patterns and buy the dips rather than trying to pick tops.

Monday's Action Was the Tell: The way the market recovered from pre-market weakness and pushed back to highs during NY open was a clear demonstration of buying pressure. This type of price action should be respected as a sign that higher prices are coming.

Moving forward, I need to align my trading approach with the current macro regime. Rather than looking for reversal setups at highs, the focus should be on identifying retracement entries for continuation plays to the upside. The market is telling us where it wants to go - my job is to listen and position accordingly.