"Sell The Bounce" Is The Theme In SPX, But For How Long? August 8 Plan

My newsletter yesterday was entitled: “ Will Today’s Bounce Be Sold Like The Others In SPX?” and the answer was yes, but it has been messy. After a historic round of selling and the largest three day pullback since the March 2022 COVID crash, ES has - since Monday morning around the open until this morning - put in the other side of the crash coin: The Short Squeeze. There is no crash, without a short squeeze and the two are always paired, one after the other. It is no coincidence at all where this short squeeze took us yesterday and today.

I wrote on Monday 4pm: “My general lean is that we are in a short squeeze currently. As long as 5191 keeps hold, it remains underway and targets 5252, 5274-76, 5300, then the 5338-42 backtest”. Yesterday, we hit 5338-42, and recall that 5338-42 was the level that the mini Black Monday crash started from on Sunday evening. It backtested. We sold off this level 100 points yesterday then today, returned there today.

I concluded my newsletter yesterday at 4pm by writing (again): “Bears retain control, and what this current dip looks like will be key. My general lean is that as long as 5228, 5248-52 keeps holding, we can work back up the levels to retest 5338-42 again”. We saw this today, holding those supports on the dip yesterday late day, returning to 5338-42 by the morning, spending hours chopping there, then selling down another 100 points again.

Today was virtually identical to yesterday: We rallied to 5340+, sold 100 points both days. Will this sell stick? Or will it get bought overnight again? In today’s newsletter I’ll talk this, I’ll do a deep dive into the setup that caused this recent short squeeze (its always the same setup: A Failed Breakdown). Finally, I’ll discuss the actionable trade plan for tomorrow.