SPX *Finally* Pulls Back. But Will It Get Bought? October 16 Plan
As I often discuss trading really is just a process of noise reduction. We need one thing to make money in markets: We have to know if institutions are accumulating or distributing, and where. Then, we follow. That is job. 100% of the information we need to do that job, is found in the price chart. We are however inundated - and moreso now in the social media age than ever before - by useless information that distracts us from this simple task. “Macro”, “click baiting posts”, “news”, all distracts us from seeing what institutions are doing right now, in real time.
From September 25th to October 9th, institutions were accumulating in a picture perfect flag and as I wrote on October 7th last Monday: “Bull case tomorrow: No change. 5734 to 5805 is a large consolidation, and this consolidation is a bull flag. This would mean pop back to 5786-88, possible dip there, then tackle bull flag resistance 5805. If this flag breaks out, we see a new ATH to 5846”. You will notice at support of this range, ES continually flushed lower - often losing the prior days lows - trapped shorts, then recovered. This is the classic footprint of institutional accumulation as I wrote extensively last week.
After trending to 5846 target by last Wednesdays close, ES formed another accumulation bull flag on Thursday. I wrote on Thursday at 4pm: “My general lean is always to defer to the trend. 5809-11 to 5840 is a new consolidation (bull flag). As long as this structure is in tact, we can break higher to 5845, 5858-60, then 5890+”. We got to 5890+ by yesterday.
Nothing however, lasts forever and after a 190 point rally from last weeks lows, ES finally a got a pullback today - its largest since October 7th. Remember that sells in ES occur *only when a support fails* and we got this at the 5895 failure this morning. I wrote yesterday: “Bear case tomorrow: For tomorrow, a short term dip may evolve below 5893-95”. We lost 5893, and down we went for the day.
Will todays dip get bought like the others? In today’s newsletter I’ll talk this, I’ll go over the setup that got us long on Friday morning at 5822. in a little more detail (this is a rare variant of my more core setup the Failed Breakdown known as Level Reclaim). Finally I’ll discuss the actionable trade plan for tomorrow.