Another Dead Cat Bounce, Or Bottom In For SPX? August 9 Plan
Its been approximately one week now since the most violent 3 day sell leg in ES (meaning the largest 3 day downside range) since the March 2020 Covid crash played out. It culminated with a capitulatory move into Monday morning, which is why I concluded my Monday newsletter by writing at 4pm: “My general lean is that we are in a short squeeze currently. As long as 5191 keeps hold, it remains underway and targets 5252, 5274-76, 5300, then the 5338-42 backtest”.
By Tuesday 2pm, we had tagged 5338-42, and sold. Since that time, ES had constructed a new, massive multi-day range for itself, roughly betweeen 5338-42 and 5185-90, and all the price action since Mondays close has been price ping ponging this massive, 150 point range. Yesterday, we saw another flush off that 5338-42 zone - with this range in mind - it promped me to conclude yesterdays newsletter at 420PM by writing: “My general lean would probably be we can perhaps dip more down to 5185-90, then take another trip back to 5338-42 again”. This played out to perfection today, and early in the evening last night, we saw this, selling down to 5185-91 range support again, then rallying up to that 5338-42 target target by noon, then clearing late day.
Can this bounce stick though? In today’s newsletter I’ll talk this, I’ll do a deep dive into the short setup that caused yesterdays 150+ point selloff (its a variation of my core bearish setup). I’ll also discuss what caused today’s short squeeze and prompted me to discuss longs in the 5185-90 zone. Finally, I’ll discuss the actionable trade plan for tomorrow.