4 Green Days In A Row For SPX. Are Bulls Running Out Of Steam? Sept 13 Plan
For the past several weeks in this newsletter, I have devoted plenty of time to talking about short squeezes. Why? Because in ES if you cannot identify where and when short squeezes will occur, you have no hope of successfully trading any type of downtrend. As I’ve spoken about for the last couple weeks, “for every action, there is an equal and opposite reaction” in ES and for every “elevator down” selloff, we get an equally violent short squeeze.
Yesterdays was particularly violent and we put in the 3nd largest range green day since the bull market began in October 2022. The prior two? The day the bull market started on Oct 13th 2022, and August 8th this year. Readers were well prepared for this squeeze and I wrote prior to CPI: “Rule 2: CPI days are characterized by traps. Some days, they are very clean and one directional, but most often the first move, and often the second and third are traps.It is for this reason that I prefer to trade failed breakdowns on CPI days…..Wait for a level to flush, run stops, and reclaim before entering”, adding: “If I had to give a lean it is that ES simply continues this relief rally. There are more magnets to the upside that need to be tagged, and these include 5519, 5528, then 5560”. After a monster trap down yesterday, we closed the day at 5560 yesterday
Today, bulls continued dip buying and I concluded my newsletter yesterday by writing: “My general lean is to defer to the trend. As long as 5543-37 holds, we can run to 5585-93.” We saw exactly this today and this morning we dipped to 5437-43 exactly, rallied 40 points to 5585-93 target and we closed just above.
After +190 points, do bulls have gas left in the tank? In todays newsletter I’ll talk this, I’ll do a full deep dive into yesterdays CPI action as we saw multiple quality examples of my core setups: A Breakdown Short initially to trigger us down to 5414, then a monster Failed Breakdown (my core setup) to trigger the short squeeze. Finally, I’ll discuss the actionable trade plan for Friday.