After 4 Red Weeks In A Row, SPX Sees A Green Week. Can It Manage Another? March 24 Plan
The last 5 weeks in ES have been unique. Prior to this week, ES put in 4 red weeks in a row, the first time its done so since April 2022, which was the early innings of the last bear market. This week, ES tried to break the cycle by putting in a green week but technically, this recovery began a little over one week ago, last Thursday.
In downtrends, relief rallies/short squeezes begin when ES sees a large Failed Breakdown (my core setup). We got this last Thursday. Last Tuesday, ES set a big low at 5586 that lasted a couple days. Last Thursday, we flushed it by 25 points, recovered, and the relief leg began and it lasted until today. I wrote last Thursday at 4pm: “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.” By Monday, we hit 5755 and sold 100 points and this number will sound familiar to readers.
We tested this level again on Wednesday in the evening after FOMC, and sold 70 points. Its not random and this level back-tests a huge “megaphone pattern” from November which we broke down on March 10th. Its recovery is a primary objective for bulls.
I wrote on Wednesday at 4pm: “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.” Yesterday morning, we saw exactly this, then we ran to 5750-55 again, and sold yet again into today.
All this action has meant for the last 3 days, ES has been in a range mostly between 5686 support and 5750ish resistance. Today was OPEX day (and these are notoriously choppy, but the goal for bulls today was to maintain this range after OPEX chop. They did.
ES has therefore put its first green week in 5, albeit a small one. Can bulls put in a larger one next week, or are deeper lows coming? In today’s newsletter I’ll talk this, I’ll discuss an example of my secondary setup type (the Back-Test Long) we had yesterday off 5686 which provided a 70+ point long. Finally, I’ll discuss the actionable trade plan for Monday.