After 4 Red Weeks In A Row, Can SPX Close This Week Green? March 21 Plan
Prior to this week, ES saw 4 red weeks in a row, for the first time since April 2022 (right at the start of the last bear market). Last week capitulatory selling where last Monday March 10th, ES broke down a multi-month megaphone pattern at 5755ish which had contained all price action since November and we sold 200 points into last weeks low.
Readers know though that my speciality is not necessarily catching those deep sells (though that is part of my edge) but rather catching the vicious short squeezes that occur after the sells. Even in a bear market, there are vicious short squeezes if not everyday, then every second or third day. Short squeezes are caused by my core setup: The Failed Breakdown, and last Thursday, we got a big one. We flushed last Tuesdays multi-day low at 5586, sold down to 5564, recovered 5586, then longs triggered.
I wrote last Thursday -1 week ago - at 4pm by writing: “We have an active Failed Breakdown. My general lean is we can re-test 5610. If bulls can clear, we can work up the levels to 5636, 5710, then 5755-62.” After a hugely lucrative 170 point rally, we tagged 5755-62 target exactly Monday afternoon.
This 5755 target was the Monday high of day, and we sold 100 points off it into yesterday. This 5755 is also no coincidence, being the back-test of the multi-month megaphone pattern referenced above. After selling Tuesday, I was looking for ES to take another crack at that 5755 level for FOMC day yesterday, writing on Tuesday at 4pm: “My general lean is we can do a little back-testing. First up to 5699-5704, then back to the megaphone in the 5750s” After FOMC yesterday, we tagged 5750+ again.
Today, I was looking for a pullback after yesterdays selloff, then to try 5755 again. I wrote yesterday: “The ideal for bulls tomorrow is to retrace no deeper than 5699 (and if that does fail, bulls want to see a quick flush to 5686 then recover). This would allow ES to continue accepting the 5750-55 megaphone resistance, then resuming higher.” This morning, we tested 5686, held, then rallied back to 5750-55, then sold. This week we have tested 5750-55 3x now, with three rejections.
After 4 weeks of relentless selling with only about three green days in that stretch, ES is working on a green week. Can it stick the landing tomorrow? In today’s newsletter I’ll talk this, I’ll discuss the setup that caused yesterdays FOMC squeeze (my core setup, the Failed Breakdown) and I’ll also touch on some of my rarer short setups. Finally, I’ll discuss the actionable trade plan for tomorrow.