Have Bears Run Out Of Steam Already In SPX? Sept 6 Plan
September started off with a bang in ES. ES spent August in the steepest rally leg of this entire bull market cycle which formally began in October 2022. This rally saw +550 points in the span of around 2 weeks and incredibly, from the August 5th capitulatory bottom at ~5120 to the 5668 high, ES went the entire month without putting in more than one consecutive red day. After this explosive move, ES spent the last two weeks of August in consolidation mode, basing between 5585 and 5562 largely, with fast traps below and above.
This abruptly ended on the first trading day of September on Tuesday when we finally broke down this range, putting bears in control. I wrote in my Friday 4pm newsletter when we were 5662: “Bear case Monday: There is no bear case until this flag breaks down at 5588-90. On a short-term basis, 5625-30 failure is likely a short though”. On Tuesday, we lost 5625, then lost the 5588 multi-week support, and down we went to 5519 and this has been a battleground since the close on Tuesday
I wrote yesterday: “For tomorrow though, as long as 5519 holds the relief bounce leg that started yesterday is still technically in tact. This would ultimately setup a push up the levels to 5552, 5567, then 5578 or 5589-91”. 5519 had been a major support level for two days, testing 13+ times as both support and resistance and as I wrote yesterday, this was a zone I’d be looking for flushes and recoveries of (my core setup). This morning, we flushed the level, rallied to 5552, lost 5519 after, sold down to 5492, then returned to the 5519 magnet by the close again.
Bears have struggled to push this lower, with every attempt down being stifled by buyers. Have they run out of steam already, only two days into this pullback? In today’s newsletter I’ll talk this, I’ll do a deep dive into the setup that caused Tuesdays flush (my third setup type; the breakdown short) and the recent bounces (my first setup type; the failed breakdown). Finally, I’ll discuss the actionable trade plan for tomorrow.