Relief Rally For SPX. Dead Cat Bounce, or Bottom? July 23rd Plan
Last week saw what I’ve called a temporary regime change in ES. Namely, we saw a rare shift from buy dips (which had been the regime since the April 7% pullback ended) to sell bounces. This manifested with some of the most substantial selling over over two months. Namely, we saw 3 red days in a row last week for the first time since April 17th, and last week was also the biggest red week since that same week. We had some good bounces in the last week, but they all were sold, until today.
Late day Friday, we got another one of these bounces and as readers know, I got long at 5542, which held to the tick (provided to readers in the Thursday 4pm newsletter). I concluded my newsletter Friday by writing: “My general lean for Monday is that ES can defend 5542 (and if we do dip, just a quick flush to 5528 then recover). From here, we can try another relief pop to 5585, 5604”. I added: “If bulls are very motivated, this would get to 5604, dip, then run back to 5630 which is huge resistance”
This could not have played out any better today, and we started today with a rally to ~5604 target, which we tested twice this morning, then cleared, pushing into the 5600s for around 70 points from Friday afternoons long. Is it a dead cat bounce though, or bottom? In todays newsletter I’ll talk this, I’ll discuss the details of my Friday long/last nights long provided to readers which provided ~70 points today. Understanding this setup and the dynamics of what causes squeeze in downtrends is extremely important to know. Finally, I’ll discuss the actionable trade plan for tommorrow.