After 8 Days of Rally, SPX Finally Pulls Back. How Deep Will It Go? July 21st Plan
Today, we finally got a dip and short trigger in ES after the most lucrative runs of 2023. The recent rally in ES was the most significant since October 2021, putting in an absurd 8 days of higher highs in a row. As readers recall in detail, the steepness of this trend (and lack of pullbacks to trigger trailing stops) meant that since the July 10th low I had the two longest consecutive trades since beginning this newsletter: From 4420 to 4538 last week (trailing stopped out), then 4533 to 4585 this week (trailing stopped out).
Two days ago, I finally started warning that the trend was nearing exhaustion, writing Tuesday: “This is the first time I have said this in a very long time - but I would urge caution with longs now” adding yesterday “I do remain cautious on new longs here. After vertical moves up, when sells do come, they tend to be strong, and tend to fall multiple levels (often 3-4 levels down in one flush), punishing those conditioned to buy dips.” Today, for the first time since early July, ES finally triggered a fantastic short setup on the loss of 4588, providing 30+ point short, beginning a leg down.
How far can it go? In today’s newsletter I’ll be talking this, then I’ll be talking how I trade flag patterns (a useful, nuanced setup for entering within trends), breaking down today’s short, then providing the actionable trade plan for tomorrow