5 Green Days In A Row For SPX. Pullback Close? August 15 Plan

Last week was one for the record books in ES, with ES putting in its largest red day since September 2022 and its largest three day selloff since the Covid crash. As I discussed extensively last week though, ES has a very particular tendency that applies both in bull markets, and (especially) in bear markets. Whenever there is a deep sell in ES; there is a face-ripping short squeeze just around the corner. They are brother and sister, and you never see one without the other. It is just a question of timing, and as readers know, the timing is always clear: Markets short squeeze after failed breakdowns and saw this last Monday morning which ultimately set the foundation for this rally.

The question is, when do “short squeezes”, become something more? One can think of it as a series of “gates” price needs to clear. The first gate and my target for the first short squeeze in ES was 5338-42, to back-test where we broke down on Sunday evening August 4th before the Black Monday mini-crash. We re-tested there by last Tuesday, then cleared it last Sunday. The next gate was 5438-42, where we broke down on August 1st, and I was looking for a rally there this week, writing on Friday: “My general lean for Monday though is..as long as we continue consolidating in this zone and ideally, above 5338-42, we can just continue to work higher to 5400, 5414, then 5438-42”. We got there yesterday, and then broke out. By clearing this “gate” we therefore opened up higher prices.

I concluded yesterdays newsletter by writing: “My general lean if I had to provide one though is to respect today’s breakout. As as long any CPI dip gets bought above the supports discussed above, we can work to 5469, 5490, then 5510 next magnet”. We made it to ~5490 this morning.

We are now 5 green in a row, can ES really manage six? In today’s newsletter I’ll talk this, I’ll do a deep dive into my trailing stop methodology which as readers know kept me long from 5342 most recent entry on Friday morning, until today. Finally, I’ll discuss the actionable trade plan for tomorrow.