Is SPX Headed For New Lows? Not So Fast. April 22nd Plan

Since February (and arguably since December) ES has been in a clear downtrend/bear market, something I have warned about daily, writing in my last newsletter: “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, within the context of this ES has been - since April 6th when the most recent low was down at 4835 - in a Bear Market rally.

For the last two weeks, there have been a variety of large sells, but unlike prior to April 6th, they have generally all been brought to prevent that terminal plunge to new lows. We saw some big ones: We had 430 point sell on April 9th, 375 point sell on April 10th, 130 point sell on April 11th, 233 point sell last Wednesday, and 56 point sell last Thursday and they were all snatched up to prevent ES from heading back towards the lows. Last Wednesday produced a significant dip buy and last 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.” Wednesday, we hit 5251 which was the exact low of day and bounced

I was looking for this to rally to continue to 5351 and 5364 before the long-week last Thursday, writing at 4pm on Wednesday: “My general lean is that ES can backtest today’s breakdown zones. This means 5351, then 5364.” This played out very well on Thursday and we tagged 5351 multiple times for a 100+ point squeeze.

Despite these dips being bought, ES ended last week in an inside week and we spent most of the week consolidating in a large range 5250 to 5485. The task for bulls today would be to hold 5250, and for bears to lose it which would trigger short. Around the open today, ES made up its mind: Down. I wrote Thursday at 4pm: “Bear case Monday: Begins under 5248-51….For the Breakdown Short here, I’d need to see a final bounce and/or Failed Breakdown at 5248-52. After this, one can short below wherever the low of that bounce is.” We lost this zone, and down we went to to 5130 and today, there were no dip buyers in sight until the final minutes of trading.

We spent all day trending lower after. Are new lows coming? In today’s newsletter I’ll talk this, I’ll do a deep dive into the long setup we had off 5251 last Wednesday (which produced a 100+ point rally into Thursdays high as it was an excellent example of a hybrid setup between my core setup (the Failed Breakdown) and a direct level buy. It was the subsequent failure of this today that sold us off. Finally, I’ll discuss the actionable trade plan for Tuesday.