Is the Bottom In For SPX? November 20 Plan

Last Thursday was the most technically significant day in many weeks, as the the market presented us with the most significant short setup since the first week of September. As I’ve said daily, there should be 0 guesswork involved as to when price will selloff in ES, and there is no need to top pick rallies and hope for a sell. The market makes it blatantly clear when it wants to sell by building an obvious support structure, then losing it.

From November 8th to November 14th, it did so and built a range with ~5998 support which held many times. Last Thursday November 14th, it broke down, and we flushed over 100 points. I provided this to readers last Wednesday, when I wrote: “Bear case tomorrow: Begins on the failure of 5998...below there we could unwind quite hard and go into “knife catch mode”.

After this sell, we began on Friday what always happens after a major selloff: A relief bounce leg, and typically relief bounce legs will originate around a critical magnet which defends for days, often with many traps below. As warned since Friday, that magnet was to be 5886 and its been a battleground all week. The magnet serves as the support zone from which price will builds a base to rally.

I wrote yesterday at 4pm: “My general lean is we are in a relief bounce, and its in play as long as we are above 5886. This targets 5935, 5958, then 5970”. This 5886 level proved to be a massive magnet: It held Friday, it held yesterday morning exact, overnight we put in a Failed Breakdown to 5882 and recovered to 5910 by 8am, and then this morning before the open we put in another huge failed breakdown to 5855 then recovered again to squeeze to 5950 nearly by the close.

I was waiting for these failed breakdowns, writing yesterday: “[5886] held once Friday, and it held again precisely this morning to set the low of day. No longer fresh, and its very vulnerable now to collapse. Ideally I’d like to see a failed breakdown of this mornings low to take this.” After a huge failed breakdown of yesterday mornings low before the open today, we squeezed for the rest of the day.

How much energy does ES have left in this bounce? In today’s newsletter I’ll talk this, and I’ll do a deep dive into why 5885 was such an important pivot this week. Finally, I’ll discuss the actionable trade plan for tomorrow.