Trading After A Short Squeeze

Thursday November 6, 2025

☀️ AM BRIEFING

Opening Remarks

Micros Trader begins today’s AM Briefing by emphasizing that the market is entering a likely “rest day” following a massive 100-point short-covering rally. The market has returned to a familiar range and spent the overnight session consolidating near the 50% level—or “half back”—of the previous Regular Trading Hours (RTH) range.

Micros Trader cautions traders to temper expectations: “Expect very little today.” Price action is expected to be choppy, thin, and lacking follow-through, making it a potentially dangerous trading environment.

Price Action: ES Rest Day

The E-mini S&P 500 (ES) futures market has returned to a well-worn trading range and shows all the signs of consolidation. According to Micros Trader, this pattern is typical of the day before a non-farm payroll (NFP) release.

He describes the price action as “crap” and “not tradable.” For less disciplined traders, days like these present heightened risk, as attempts to recover from even a small early loss can spiral into frustration and deeper drawdowns.

Micros Trader reinforces the danger by saying, “Touch and goes will be rare. Follow-through will be almost impossible.” The guidance is to avoid trying to “make something happen” on a day where the market is unlikely to provide clean moves.

Core Strategy: Patience and Trading the Edges

Micros Trader stresses a defensive and highly selective strategy. The plan for the day is to avoid the middle of the range and wait for price to reach a clearly defined “edge”—the high or low of the range—before considering any entries.

He notes, “I’m not interested in trading the middle of this anymore. It’s so beaten up. There’s nothing fresh here.” Instead, he instructs traders to disengage and wait: “Let it take out that RTH high and then reassess with a fresh set of eyes.”

Until the price interacts with a strong level, the advice is to step back: “Have your DOM closed. Let’s wait till we get to an edge.”

Glossary of Key Terms

  • RTH: Regular Trading Hours — the main trading session, typically 9:30 AM to 4:00 PM ET.
  • Short covering: When traders buy back borrowed shares or contracts to close open short positions, often causing a sharp upward move.
  • DOM: Depth of Market — a real-time list of buy and sell orders for a given instrument.
Never short short covering — it’s a high-risk, low-probability trade setup.

Essay Format Questions

  1. Which trade setup should you have skipped today, and why didn’t you?
  2. How will you adjust your patience next time price sits in the middle of a range?

Risk Management and Discipline

Today’s environment demands extreme discipline. Micros Trader reminds traders that one loss is enough: “Take a loss and just walk.” It’s not the day to push, as the market isn’t offering high-probability opportunities.

He also enforces a hard stop to the trading day at 11:00 AM Eastern. Beyond that, conditions deteriorate, and trading becomes unproductive. This cutoff is reinforced by a scheduled Trump announcement, which may add volatility.

Micros Trader encourages reflection via journaling prompts, particularly focused on identifying trades that should have been skipped. He references a detailed discussion with trader Alex as an example of how important this review process can be.

Forward-Looking Analysis

To close, Micros Trader discusses upside potential and key technical levels.

He identifies the RTH high and slightly higher London high as the next resistance zones to watch. Reviewing a 30-minute chart, he observes that prior rejections at these levels are weakening—the first was strong, the second much smaller—suggesting a possible breakout.

Despite the rest day tone, the longer-term trend remains upward. He reminds traders to keep an eye on upcoming catalysts such as the University of Michigan consumer data and the Trump announcement at 11:00 AM, both of which could trigger significant moves.

❓ FREQUENTLY ASKED QUESTIONS

Futures Trading FAQ: ES Rest Days, London Session Behavior, and Journaling Lessons

What is the observed nature of the London session concerning the Asia session range?
A: The London session often loves to take both sides of the Asia range. If it opens up on one side of the Asia range, it typically aims to take out the opposite side.

What key lesson should a trader record in their journal when attempting to short a strong upward move?
A: If a trader shorted a significant upward price move, the big lesson they should put in their journal is: Never short short covering.

When the ES market is identified as likely needing a “rest day,” where should traders look for potential entries?
A: When expecting an ES rest day with limited follow-through and difficult trading conditions, traders should avoid the “beaten up” middle area of the range and instead wait until the price action gets to an edge.

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