Major Bullish Reversal Day In SPX; Dead Cat Bounce Or Bottom? Oct 5th Plan
Today played out perfectly in ES. Yesterday, the very last sentence of my newsletter was “I am mindful of short squeeze risk here” and readers can see why. Right on queue, after a quick and final overnight flush, we got a big short squeeze today. As discussed yesterday - of the last 13 trading days before today - were all red with the exception of two relatively small relief bounce green days, neither of which had a follow through day.
Staggeringly, there have not been two consecutive green days since Sept 13th. We put in a big Day 1 green candle today, and this all conformed nicely to yesterdays plan. I wrote yesterday: “Generally though, a bull case would look like ES defending 4230 on any further selling and from there, heading to back that 4290, 4304-08”. This is precisely what played out, and overnight, we got a final flush into the 4230s, it defended, and then we got a large squeeze to 4304-08 final target.
Today, we backtested the big multi-month support zone where we broke down from yesterday, and ES managed to put in a good green day with a large wick (bullish hammer candle and largest in almost a month). Can bulls manage the rare second day in a row? In today’s newsletter, I’ll talk this, I’ll then discuss short squeezes like today and what causes them. I’ll then provide the actionable trade plan for tomorrow.