Is This A Dead Cat Bounce For SPX, Or Bottom? Nov 19 Plan
After a historic election week rally where saw the biggest green week of 2024 and a euophoric move to ATHs, ES came crashing down to reality last week and we got the largest red week since the first week of September. Last weeks correction was classic in the technical analysis sense: We built a base last Monday-Thursday with a well-defined support structure at 5998. On Thursday, we lost it, and sold.
The beauty of technical analysis is we don’t need to play the crystal ball game that other market participants do. We don’t need to top pick or try to guess where or when selloffs will come. The market makes it clear by printing well defined support zones, and we can react short below those zones. Last week, that short below zone was the obvious shelf at 5998 and its why I wrote Wednesdsay at 4pm: “Bear case tomorrow: Begins on the failure of 5998...below there we could unwind quite hard and go into “knife catch mode” where we could sell for many hours or potentially a full session”. Last Thursday, we lost 5998, and down we went until Friday’s lows.
After “elevator down” red days like Friday though, price always sees a short squeeze to back-test some of the zones that failed on the way down. Its why I wrote on Friday at 4pm: “We have yet to have the first post sell-off short squeeze and if its going to occur it would likely be from this general area….My general lean is that we can try a bounce to back-test some of the breakdown zones from yesterday. This would mean 5948-50”. We got to 5934 today before running out of steam.
Is the relief bounce already over for ES? In today’s newsletter I’ll talk this, I’ll do a further deep dive into Thursdays and Fridays short setups. We saw great examples last week of my third and most complex setup type: The Breakdown Short and you will need to know this inside out for when we start a sustained correction or bear market. Its rare in bull markets and we don’t get it often. Finally, I’ll discuss the actionable trade plan for tomorrow.