Biggest Selloff Since March 2023 For SPX. Now What? July 25 Plan
As I discussed daily last week, “sell the bounce” was the theme for last week, with ES putting in its first three day selloff since April 15th into last Friday. Today, it resumed with staggering force, but not without a strong relief bounce to start the week. I was looking for this bounce on Monday, and I had one clear target for it: 5630. I wrote back on Friday: “My general lean for Monday is that ES can defend 5542 (and if we do dip, just a quick flush to 5528 then recover). From here, we can try another relief pop to 5585, 5604…If bulls are very motivated, this would get to 5604, dip, then run back to 5630 which is huge resistance”.
I then wrote on Monday at 4pm: “My general lean is that bulls have some more energy left, and as long as above 5564-66, the bounce is in play (if bulls are very motivated, ES won’t even lose 5604). This would target 5630-32, which is a big inflection point”. Inflection point was probably an understatement, as we tagged 5629.75 high of day yesterday, and then put in what turned into a 150+ point, single session sell. I wrote yesterday: “Bear case tomorrow: Begins on the fail of 5570”. After gapping down at the 6pm futures open last evening and selling to this 5570 region, we lost it overnight, triggering another deep flush down into today with ES putting in the deepest sell in a single session since March 2023. This was a full day of relentless, one directional selling. We may get a handful of days like this a year, even in a bear market.
Can ES try a relief bounce now? In today’s newsletter I’ll talk this, I’ll then discuss why we got a monster selloff off 5630 (hint, its my secondary setup type: The Backtest. One of the foundational building blocks of price action). Finally, I’ll discuss the actionable trade plan for tomorrow.