After a Historic Sell, Can SPX Close The Week Green? July 26 Plan
Yesterday was a slice of market history. Not only did ES put in its largest red day of the 2024 year by a significant margin, but it put in its largest red day since December 2022 and in doing so, snapped a 357 trading day streak without a 2% selloff, a statistic that had been frequently cited for many months. Today, we got a violent short squeeze after this.
This 150+ point selloff began on Tuesday from 5630 and I wrote last Friday: “If we reclaim 5568-66 on Monday, we probably squeeze…If bulls are very motivated, this would get to 5604, dip, then run back to 5630 which is huge resistance”. We hit 5629.75 high of day Tuesday. While I knew 5630 was huge resistance that would produce a sell, nobody expected the historic rout that would follow, with the most violent sell in years. This shows the power of simple technicals though. There was no in depth macro analysis required to determine the point this sell occurred from. Just a simple, clear line that was formerly support last week at 5630, turning into resistance.
This took us into today, where the short squeeze began. I was looking for a relief pop today and I wrote yesterday: “My general lean for tomorrow is that ES can try a relief pop”, adding “Obviously bulls have considerable work to do here in order to regain any control, and they ultimately have to get back above 5550ish now (where we sold off from today), in order to set any sustained, multi-day low”. Today, we squeezed violently, getting to 5530s then retracing by close back to the daily lows. Can ES try another bounce tomorrow, and will this one stick? In today’s newsletter I’ll talk this, I’ll go over why we squeezed today, and the setup. Finally, I’ll talk the actionable trade plan for tomorrow.