Inside Week For SPX. Can Bulls Continue the Bear Market Rally Next Week? April 21st Plan
NOTE: This is a resend of the newsletter for Monday April 21st, originally sent out on Thursday at 4pm, for those who did not receive.
My newsletter yesterday was entitled: “Will Today's Dip In SPX Get Bought Like The Others?.” The reason for this title was because after selling off 935 points from April 2nd to April 6th, ES - since Sunday April 6th - had been in the midst of a clear bear market rally. This is something I specified at the close back on Tuesday (when we were 5420s), stating: “Big picture, we remain in a downtrend and this won’t change until ES recovers the red megaphone in the above chart up at 5700ish.” However, by virtue of the fact that we have been in a bear market rally, this also means that ES has found itself in “buy dips” mode since April 6th.
These dips were large: 430 points on April 9th, 375 points on April 10th, 130 points on April 11th. Yesterdays dip was 233 points Tuesday into yesterday, therefore as I stated yesterday, the capacity for this dip to get bought would be a telling statement on the durability of this rally “and if speaks to the health of this rally the last two weeks.” Back on Tuesday at 4pm, I wrote that 5251 would be a key support in the event of a Wednesday selloff, writing on Tuesday at 4pm: “Below there 5298 is another spot to look for reactions as is 5252.” Yesterday, we hit 5251 which was the exact low of day and bounced, and I longed here as confirmed again at 4pm yesterday.
Today, the mission for bulls would be to see the dip continue to get bought at this level. My lean yesterday was bulls could do it, stating: “My general lean is that ES can backtest today’s breakdown zones. This means 5351, then 5364.” This played out very well and by midnight last night, we tagged 5351 then 5364+. After that we spent the day today in OPEX chop (and we tagged 5351 several more times today) and as I warned yesterday: “Tomorrow is OPEX day and these are *often but not always* extremely choppy so it will be vital not to over-trade, not to force trades. Take your planned entry, manage it level to level, get to the sidelines.”
OPEX day is an unusual session though, and much of the action is related to positioning adjustments rather than genuine buying or selling. After all is said and done though, this week was an inside week for ES (representing consolidation). This inside week occurred in the context of a bear market rally that has been ongoing since April 6th. Can it continue next week? In today’s newsletter I’ll talk this, I’ll do a deep dive into the setup that caused yeserdays sell (breakdown short, my third setup type) as well as the late day squeeze off 5251 that rallied us since yesterday. Finally I’ll talk the actionable trade plan for Monday.