A Rare Two Red Days In A Row For SPX; Do Bears Have Legs? Feb 21st Plan

My final newsletter last week was entitled: “First Red Week For SPX In 5 Weeks. Another One Incoming?”, while the week is very young, bears put in an earnest attempt to start the week, in this case putting in a 70+ point dip from Friday’s high to today’s lows. Notably, this is now two red days in a row, and this alone (as mild as it is) has been extremely rare and *not a single time* this year other than the first few days of January has ES put in more than 2 red in a row.

What caused the dip? As readers know, I am an evidence-based trader, I don’t guess when sells will come, nor pretend to have a crystal ball (nobody does). I react with shorts when a level fails. No guessing, no wondering, no drawdown required. In today’s case, it was the loss of 5018 yesterday that triggered shorts. I wrote Friday: “Bear case Monday: Begins on the fail of 5016-18” adding “If 5016-18 fails, it means ES needs to retrace more of the late this weeks rally. I want to be short below there, with level to level profit takes.” Last night, this short triggered, and we saw a fantastic nearly 50 point sell with no drawdown.

This is the 4th two day dip since January. The others were bought violently, will this be too? In today’s newsletter I’ll talk this, I’ll go over two of my core setups (the failed breakdown and the breakdown, which caused Friday’s rally and today’s sell respectively). Finally I’ll discuss the actionable trade plan for tomorrow.