SPX Bulls Manage A Rare Green Day. Can They Follow Through Now? March 13 Plan
After three red weeks in a row, this week started off with a bang in ES. As readers know, I have spent months discussing a single chart pattern: A multi-month “megaphone” pattern that we had built since November and every single major, multi-week bounce since then came off this support. Bulls had one job on Monday. Hold it (support as of Monday was 5720), and if they didn’t, shorts would trigger.
I wrote back on Friday at 4pm: “Bear case Monday: Begins under 5720.” On Monday morning at 8am, the market made up its mind. We lost this structure, and we got a selloff of corresponding magnitude: ES put in the biggest red day since the August 5th capitulatory day, and we put in the first open-to-close trend day to the downside since February 21st. As readers know though, ES does not sell linearly and after all “elevator down” sells, come short short squeezes. What causes short squeezes? My core setup: The Failed Breakdown. My job each day is to wait for these
Yesterday at 2pm we got a Failed Breakdown where we lost a huge shelf of lows at 5568-72 flushed down to 5533, then recovered. I wrote Monday at 4pm: “If we head down to new lows tomorrow, the Failed Breakdown of today’s low is obviously of interest. A flush to 5568 or even down to 5548-50 and recover would be of interest.”
This played out fantastically well and we rallied 105 points to 5670 this morning after CPI. From there, we went “elevator down” again to the 5550s this morning. What happened from here? Everyone knows the drill by now. I wrote yesterday at 4pm: “One possible entry is the flush of 5568-72 and recover.” At around 11:20AM today, we got this setup, longs triggered, and we rallied 60+ points again.
ES put in a green day today, but ES has not put in two green days in a row since February 19th. Can it finally pull it off?In today’s newsletter I’ll talk this, I’ll do a deep dive into some of the setups from my system we saw this week as its been a goldmine particularly for my core setup type (the Failed Breakdown which caused the recent rally) and my rarest setup type (the Breakdown Short) which caused the Monday sell. Finally, I’ll discuss the actionable trade plan for tomorrow.