Is The PullBack Already Done In SPX? Not So Fast. October 17 Plan
Selloffs in ES have been a rarity and incredibly - since the September 6th low - ES has been unable to put in two consecutive red days in a row, with every single dip being bought the next day, and today was no different. This rally went full parabolic last week after ES had spent from September 26th until October 7th building out then breaking a picture perfect bull flag.
I wrote in my Monday October 7th newsletter: “Bull case tomorrow: No change. 5734 to 5805 is a large consolidation, and this consolidation is a bull flag. This would mean pop back to 5786-88, then tackle bull flag resistance 5805. If this flag breaks out, we see a new ATH to 5846”. By Wednesday we broke out the flag, hit 5846, then from there, we spent Thursday bull flagging again. I wrote Thursday at 4pm: “My general lean is always to defer to the trend. 5809-11 to 5840 is a new consolidation (bull flag). As long as this structure is in tact, we can break higher to 5890+”. We got to 5890+ by Monday.
After this incredible leg up though, we got one of those rare single day dips yesterday. Remember that ES does not randomly sell off, it sells of when a support fails, which passes the baton from bulls to bears temporarily. I wrote in my Monday 4pm newsletter: “Bear case tomorrow: For tomorrow, a short term dip may evolve below 5893-95”, and we got a 70 point flush yesterday into today which was the largest sell since October 7th. This would mean bears had the ball to start the day today, and we could get started on Backtesting some of yesterdays breakdown points. I wrote at the close yesterday: “In summary for tomorow: Bears control for now. My general lean is that ES tries to backtest some of the breakdown zones from today…From there, we head to 5883, then 5902”. We got to 5883+ by 1pm.
Was todays bounce a dead cat bounce, or a sustained bottom? In today’s newsletter, I’ll talk this, I’ll do a deep dive into the setup that got me short yesterday (its my core bearish setup, the breakdown short). This is the rarest, the most difficult but also the highest R/R of my three setups, and while we don’t see it often now in a bull market, we will daily once the trend flips. Finally, I’ll discuss the actionable trade plan for tomorrow.