Biggest Selloff For SPX Since September 6th. Should We Buy The Dip? Oct 24 Plan
After a 195 point rally from October 7th to October 14th, ES had spent the last 1.5 weeks in a holding pattern, building out a new range, largely from 5900-15 to 5855-65. I call these ranges “Mode 2 consolidations” and ES spends the vast majority of its time in these types of ranges, interspersed between trend legs. Today, we finally broke it down, and got an A+ short setup and the deepest sell in over a month.
Prior to this, we spent the last two weeks ping ponging this range up and down. Yesterday morning, we sold to range support at 5860ish. I wrote in Mondays newsletter at 4pm: “There is a possible entry here on a failed breakdown of today’s low at 5865”. Yesterday morning before the open, we got my core setup - a classic Failed Breakdown of the Monday low at 5865, longs triggered, and we rallied to range resistance at 5900+.
After this bullish close yesterday - and since we know ranges ping pong up and down - it should not come as any surprise at all what we saw overnight into this morning. A selloff back to range support, and this was my lean for today. I wrote yesterday: “No change. 5915 to 5857-60 is pure chop. This can fill out any number of ways (and yes, we can easily fill it out all the way to downside again. This is what price does, it traps to the upside, then traps to the downside)” By 10:15AM today, we had sold down to 5857-60 range support exactly.
At this point, ES finally broke down the range, and we got a massive short trigger. I wrote yesterday: “Bear case tomorrow: The real bear case does not start until ES loses 5857-60 and breaks down this range..After this, I’d consider short below wherever the structure is, probably 5855”. The 5855 short trigger hit, and we sold for the remainder of the day down to 5800, then bounced.
This was a fantastic short, but was it just a one-off, or is more coming? In today’s newsletter I’ll talk this and I’ll go over today’s short setup in a little more detail Finally, I’ll discuss the actionable trade plan for tomorrow.