Largest Red Day For SPX Since November 1st. Buyable Dip Or Not? November 15 Plan

Last week was a piece of market history with ES putting in the largest green week of the year and largest post-election rally in the history of the S&P 500. As I’ve discussed at length though, rallies like that don’t come for “free”. It takes weeks to setup a rally like that (recall we spent the back half of October largely consolidation) and after a rally of that size, it can take days of grinding, complex chop to setup the next clean move.

Markets spend the majority of their time in bases - which represent institutional accumulation or distribution - followed by short trend explosions. Since Monday, ES had been building a large base (it was a flag) with supports generally 5988 and 5998-and resistance mostly in the 6030s. On Tuesday, we got the first push into support of this base and I wrote on Monday at 4pm: “Bulls will want to see 5985-88 lowest hold on any deeper corrections”. 5986 was the low on Tuesday and lasted until until today, where we re-visited it again.

After bumping into resistance over and over for days, today ES lost support of that structure at 5998, we resulted in several hours of very choppy selling whereby every new low was rapidly bought up, before a new low was made a few hours later. As I wrote yesterday: “Bear case tomorrow: Begins on the failure of 5998” and bears did put in an effort, albeit a very slow one which did not accelerate until after hours.

While today’s dip was nothing to write home about, it was the largest red day still since November 1st. Can it continue? In today’s newsletter I’ll talk this, I’ll do a deep into a setup of mine I don’t devote enough time to: The Back-Test Long, and its what caused the large rally we had from 5985 on Tuesday. Finally, I’ll talk the actionable trade plan for tomorrow.