Did SPX Bulls Drop The Ball? May 25th Plan

This week has been a mirror image of last week. Last week as readers recall, ES built a textbook 10 day triangle pattern, and broke out to trigger a 100+ point rally. This week, it built a smaller triangle as discussed yesterday on Friday/Monday, and broke down, triggering a nearly 100 point sell.

As readers recall, I wrote Monday evening: “If 4197 fails, the triangle breaks down and we could go into free fall” and free fall probably turned into an understatement, as we put in an incredible 7 red four candles, with only one miniature green candle in the middle of the stack. However, while this 100+ point sell seems dramatic, we have had two just in the past month or so (127 points in April, 140 points early May). Those dips, like all dips since Oct, were bought.

Will this dip be also? In todays newsletter I’ll be talking this, then breaking down the setup that triggered this selloff/short yesterday (breakdown class trade), and finally discussing the actionable trade plan for tomorrow.