Rare Green Day For SPX, But Will It Get Sold Like The Others? March 6 Plan
This week (particularly yesterday) has been the most volatile since the window of hyper volatility we had in early August 2024 and yesterday alone saw three 100+ point bi-directional round trips. Despite the volatility though, the technicals have kept us on track and this week has been largely centered around two levels: 5858 and 5875. I wrote back on Sunday (when we were 5960s) that the “Bear case Monday: The real bear case begins if 5870-75 fails.”
Why 5875? This was the core uptrend channel from October 2023 and late day on Monday, we lost it putting bears in control and flushing us to Monday’s 5820 low of day. We then spent Monday evening back-testing 5875ish and I wrote Monday at 4pm that: “Bear case tomorrow: Resumes under 5850.” Why 5850 this time? This was just under 5858, which had been a massive multi-touch support shelf all day Friday, and all evening Monday into Tuesday. Yesterday, we lost 5850 at 7am, and put in a ~110 point flush into yesterdays low of day.
Here’s where we can see the magic of technical analysis. Remember that after every “elevator down” selloff in ES comes a short squeeze. This is one of the only things that approximates a law in markets. Yesterday afternoon, we saw a vicious 130 point short squeeze. Where did it take us? To 5875; to the tick almost, from which we sold into into this mornings 5750s lows. This was a backtest of that channel from 2023, and its now a bull/bear line. A wall below which bears control and above which bulls can try to regain control.
Today, I was leaning towards bulls trying another crack at that zone. I wrote yesterday my general lean was “that ES can try another crack at 5858 then 5875. Those will need to clear though, or we just resume lower to 5730, and beyond. Triggers are included above.” By 2pm today, we got to 5858.
ES managed a green day today, but we are still 8 of the last 10 red. Can it follow this one up? In today’s newsletter I’ll talk this, I’ll do a deep dive into my third and rarest setup type: The Breakdown Short as it was this setup that ultimately got us short Monday and yesterday for the deepest sell since August 2024. Finally, I’ll discuss the actionable trade plan for tomorrow.