Did Bears Drop The Ball This Week In SPX? Oct 7th Plan
The first week of October has come to a close in ES. The month started off virtually identical to how September started, with a good sell and short opportunity. This does not happen often in ES and on Tuesday we got the 1st short setup in many weeks. As readers know, in my system we do not guess when sells will come in ES. We do not pick tops and hope for the best. We respect the trend, and only fight it when ES loses a significant support. Then, we take profits quickly, because sells are always with no exception followed by short squeezes in ES. Short squeezes are caused by my core setup: The Failed Breakdown when ES flushes a major support, traps, recovers.
Its what we saw this week. I wrote in my Monday 4pm newsletter: “Bear case tomorrow: Begins again on the fail of 5777….As always, I don’t chase. This 5777 zone is so well tested now it doesn’t really need anything to fail now and could easily just flush through and plunge”. We lost 5777 Monday morning, and down we went for an 80+ point flush. After this, we short squeezed, then ES spent 3 days trying over and over again to sell, with each dip below 5740 being rapidly bought up by institutions.
This took us to todays jobs report at 830AM. My lean was that we spike to 5800+ which is why I got long at 4pm yesterday as readers know. This is exactly what we saw.
I wrote yesterday at 4pm: “If I had to provide a general lean though, it is to defer to the macro trend. As long as 5744, 5734 holds, we head higher. This would target 5772 1st, then 5782 2nd. Maybe dip there if bears want, then on to 5800+”. We held 5744 exact overnight, rallied to 5800+ by the open today, then dipped before rallying again there into the close.
Despite a strong start to bears for the week, they were unable to follow through, and we are now basing. What pattern is forming, and did bears drop the ball? In today’s newsletter I’ll talk this, I’ll do a deep dive into multiple iterations of my core setup (the failed breakdown) that we had the past few days at the 5740 level and this has been one of the better examples of how this setup operates. Finally, I’ll discuss the actionable trade plan for Monday.