Relentless Melt-Down For SPX; Relief Bounce Friday? September 22nd Plan

Back on Monday, I started my newsletter by saying: “Today was a very muted session but with FOMC Wednesday and with this week being the most bearish stretch of the year seasonally, it is sure not to last”. This was probably an understatement, and not only did the most bearish two weeks of the year seasonals track with perfection, but we’ve seen big volatility.

It is important to remember why we saw relentless selling all day, as it was no coincidence. Yesterday at 3pm, ES broke down the only pattern that mattered, and one I’d been talking about daily for weeks: The 2 month triangle pattern at 4473. From there - as always after major pattern breaks - it was elevator down, putting bears formally back in control for the first time in weeks. I said before FOMC: “Bear case tomorrow: Begins on the fail of 4470-73 and this could be a deep sell” and deep sell it was, with 100 points of downside without a meaningful bounce. I wrote yesterday that the triangle breakdown “Triangle breakdown (assuming it holds) generally targets 4418-24 (the bolded red line below), then 4385” and today, we got to 4385

Yesterday was the perfect storm for bears: We had a major pattern breakdown to trigger selling at the same time that the most bearish seasonal cycle of the year began. Having reached the 4385 level though, is it time for a bounce? Today I’ll talk this, break down the setup that lead into today’s sell, then provide the actionable trade plan for tomorrow.