You can see the small opening for this nest in the middle of the photo. The nest was made of some leaves, small twigs, some dried vegetation, but mostly fine strips of bark peeled off of conifers. Reds, like Grey squirrels, prefer cavities in trees, (though they'll also use nest boxes as a cavity substitute), and often use both in the winter, going from one to another for shelter. It sometimes seems that these nests are considered secondary shelters, but in some cases are probably primary ones.