SPX Consolidates For Its Next Trend Leg. What Way Does It Breakout? October 20th Plan

In my last newsletter, I talked about how ES had failed to put in 3 consecutive green days since September 12th. The last two days were green, and bears managed to keep the streak going today with a red day today. It is not overly surprising - we rallied 276 points over the last week, and markets have spent since yesterday’s high doing what they typically do after a big one directional move - building a base and cooling off.

I wrote in yesterdays newsletter: “I favor a bullish path that sees something like 3765-70 pullback and chop around sideways for maybe a day or so to back-test some of the above supports, then breakout”. This played out very well with ES clipping 3765-70 in the overnight session, then spending the day pulling back and chopping.

Of course, this base that has built since yesterday will result in another large, clean trend leg. The window for bulls to push it up though and continue the October rally for another leg is closing quickly though. In today’s newsletter, I’ll talk pattern forming here, targets, and what the melt-down triggers are if bears step back in.