Monster Squeeze For SPX. Bottom In, Or Trap? Tariffs Decide. April 3rd Plan

Last Friday was one of the largest red days of the year for ES, selling 200 points in a single session and this sell was caused by ES losing the 5720ish “megaphone” support from November, which was also a key support shelf from Wednesday to Friday last week. However, as I discuss freqently those deep “elevator down” selloffs have a sibling, and these two siblings don’t spend much time away from each other: The Short Squeeze. Short squeezes are caused by my core setup, the Failed Breakdown, and first thing on Monday morning, we started on this and it ran into today.

I wrote on Friday at 4pm: “Below 5585 we retest the major lows at 5565. A Failed Breakdown here would be very much of interest and this remains a strong zone.” On Monday morning we lost 5565 (March 13th multi-week lows), sold to 5534, recovered 5565, and longs were triggered for the week. From there, we squeezed 120+ points to Monday’s 5670 high. For those who missed that entry though, the market is generous and gave us another Failed Breakdown yesterday and *again* this morning for good measure.

I wrote Monday at 4pm: “Heading into tomorrow 5620-25 is 1st support down. Since bears control I am in no rush to insta-buy this or any support (my preference is always high quality Failed Breakdowns). I’ll be watching the reaction here though and if we can flush it and recover with momentum (ideally down to 5600) I’d long.” At 10am yesterday, we sold down to 5600 exact, to the tick, recovered 5620, then rallied again to 5690s.

For those who missed that though, we got the exact same setup this morning to add more long exposure and this rally had one clear target: The Back-Test of last Friday’s 5720 break-down zone, and from there the future of this rally would be determined. Its why I wrote yesterday: “We are in a rally leg that began on Monday with the failed breakdown of 5565…We could fill this out in many different pathways but as long as 5620 holds, we continue up to 5695, 5720-25. Test there, and if that clears, the next squeeze leg begins to 5770, 5797.” This morning we tested 5620, put in another classic Failed Breakdown to get us long, then tagged 5720-25+ by noon.

We have at 4pm today the catalyst that will determine whether this rally has legs with the big “Tariff Day” event. Can bulls keep this push going? In today’s newsletter I’ll talk this, I’ll do a deep dive into the Failed Breakdown we saw Monday that started the recent leg up, and yesterday to continue it. Finally, I’ll discuss the actionable trade plan for tomorrow.