Have SPX Bulls Finally Run Out Of Steam? September 19 Plan
Today was FOMC day and heading into FOMC was one of the most staggering rallies of this entire bull market cycle that began in October 2022. Specifically, ES was 7 green days in a row, with one of those green days (last Wednesday) being the 3rd largest green day since the October 2022 bottom. For readers of this newsletter, this rally was not surprising and as I warned on Friday September 6th (when we were 5450 after a full week of selling): “Obviously a short squeeze is around the corner”, and “Remember that when ES short squeezes - it is violent. We could recover this entire selloff in a day or two easily if ES really wants, just like we did at August lows”.
While it took 6 trading days not a day or two, we recovered all the September losses effective yesterday. The first week of September crash began from the 5725 level, and we returned to it yesterday. Prior to FOMC, I was looking for an official re-test of those September highs, writing on Monday at 4pm: “We are chopping ahead of FOMC. My general lean is always to defer to the trend. 5680 to 5703 is a pure chop zone and as long as 5680 holds (or recovers on any traps below) we can work higher to 5720, then 5734” and we tagged 5734.
This took us into FOMC day today, and it was the same drill for today. I wrote yesterday at 4pm: “My general lean is always just to defer to the trend. As long as 5680-85 keeps hold (with any traps below bought) we can work back up to 5730s, perhaps a final dip, then make the charge towards the ATH with 5760 en route. If 5680 fails, ES can try to snap its green day streak”. At around noon today we saw this. We dipped to 5680-85, held exactly, then bounced to 5700+ before FOMC. Right after FOMC, we tagged 5680-85 again and rallied to 5755. We then tested 5680-85 a third time at 320PM, and a 4th time into the close.
I wrote yesterday that: “Tomorrow however, is FOMC day and these days are notoriously the most volatile, extreme, difficult-to-trade days of the year” and today certainly delivered. After over a week of upside, have bulls run out of steam? In todays newsletter I’l talk this, I’ll talk about the action we saw around the 5680-85 level as this level demonstrated my core setup: The Failed Breakdown, multiple times this week. Finally, I’ll discuss the actionable trade plan for tomorrow.