Pullback Day In SPX; Buyable Dip, or Top? October 19th Plan
Today started off as Day 5 in a row of intensive rangebound trading, and perhaps the choppiest day in many months, before finally trending late day to the downside. After the 187 point rally from October 6th low, ES has done what it always does after a large move and entered into consolidation mode spending nearly a week playing ping pong in a range generally between 4366 and 4418.
This range continually tightened until reaching peak chop today, before finally breaking. I wrote yesterday: “We remain in a total chop zone and I consider everything between 4418 and 4367-75 as being pure noise”. The market took this very literally, and the 4375-67 zone was a magnet unlike we have seen for months. We bounced there early in the session twice, based there for hours, before *finally* breaking down mid-day, backtesting, then heading lower.
I concluded my newsletter yesterday by writing: “Bear case tomorrow: Begins on the fail of 4367…If we test that 4375-67 support zone, attempt another tradeable bounce, and then it fizzles out to accept the zone, I’d be getting short perhaps 4364 for a good sell. I’d be looking to 4343 at least on this”. We got to 4343 into the close, but zooming out we have only retraced about half of last weeks rally. Is this dip just a correction, or something more? In today’s newsletter I’ll talk this, go over one of my favorite setups (the backtest), then provide the actionable trade plan for tomorrow.