Deepest Selloff For SPX Since The 2020 COVID Crash. What Now? April 4th Plan

Yesterday and today was very literally a session for the history books. I sent my newsletter out early at 2:45PM, in advance of the upcoming “Tariff Day” catalyst at 4pm. In that newsletter, I warned readers that: “We could sell 200 points. We could rally another 200 points. We could do both.” emphasizing not to predict the price action, but rather react impartially. This 200 point figure turned out to be understatment yesterday alone we rallied from 5620 to 5770 (+150 points), before ES got tape bombed at 4PM taking price down to 5485 by yesterdays close (-290 points), then further down into today..

While this action is headline driven entirely, the technicals still tell us where and how to engage and two of my setup types (The Failed Breakdown -my core setup - and the Backtest, my third setup type) were particularly valuable. Heading into Wednesday, 5620 was a key level, tested 5x in the last week and I wrote Tuesday at 4pm: “Below there is 5620-25 again. This level has been tested to absolute death today so I won’t be insta-buying it, but if we can flush this afternoons 5625 low and recover, I’d be looking at this.” Yesterday morning, we flushed 5620, sold 10 points, recovered it, and got long for a monster squeeze via my core setup: The Failed Breakdown.

As I wrote that same day: “We are in a rally leg that began on Monday with the failed breakdown of 5565…We could fill this out in many different pathways but as long as 5620 holds, we continue up to 5695, 5720-25. Test there, and if that clears, the next squeeze leg begins to 5770, 5797.” After a 190 point rally, we got to 5770 by 4pm yesterday. The technicals were looking great here, but then the market got taped bombed.

I sent yesterdays newsletter out early at 2:45PM in preparation. In that, I wrote “Bear case tomorrow: Begans under 5620…There is also an advanced short available under 5673.” After spiking to 5770, we lost 5673, then 5620, giving full control back to bears, and we sold to 5485 last night, where we spent much of the day today before resuming down.

Yesterdays event gave ES the deepest sell in a 1-2hr period since the March 2020 COVID crash, and destroyed structure in the process. What comes next? In today’s newsletter, I’ll talk this, I’ll do a deep dive into yesterdays sequence of Failed Breakdown Long followed by Breakdown Short as this was a good opportunity for education. Finally, I’ll discuss the actionable plan for tomorrow.