SPX Finally Puts In A "Red" Day, Snapping Its 8 Day Streak. Can It Follow Up? Aug 21 Plan
Its been a staggering rally in ES with yesterday being the 8th green day in a row for the first time since November 2023 - today, it finally snapped marginally. I have spent the entirety of the last week going over the principles of trend in ES. Namely, how to identify who is in control (bulls or bears), how to identify when that changes (hint, its when a support fails), and most importantly, emphasizing the importance of not fighting it until triggers are present. The market is a tool to take money from those who try to counter-trend prematurely “picking tops and bottoms”, and give it those who can patiently wait for confirmation of a trend flip, then ride that trend until it changes. It did to “bulls” during the 600 point sell we had from July 16th to August 5th. It did it to “bears” during the 500+ point squeeze we had this week.
As I said yesterday, the reality is it is not “bulls” that make money in the legs up and “bears” in the legs down - the same skill traders make money both ways, and the same opposing group of traders lose money both ways by fighting it. I started off this week by looking for a rally to 5629, writing on Friday at 4pm: “My general lean though has to be to defer to the trend until it loses a support. This means that as long as 5543-46 keeps hold, we can pop up to 5595, 5604, then 5629”. We tagged 5629 right into the close yesterday. As I wrote yesterday: “We also find ourselves at below the next major resistance cluster up at 5628-30, and this was the level that took the market down 500+ points on July’s breakdown and subsequent backtest.” After probing above this morning, we put in a mini-dip today to 5608ish with 5629 then acting as resistance all day today afterwards.
I concluded my newsletter yesterday by writing: “My general lean though is always to respect the trend until it ends. As long as bulls can hold 5615, 5604-5594 lowest on any dips tomorrow, we simply continue the march up”. The dip was (so far) bought. Was that it, or can bears follow up? In today’s newsletter I’ll talk this, I’ll go into detail about two aspects of my system 1) How to identify intraday trend change and 2) I’ll discuss the unorthodox failed breakdown setup yesterday that got me long for the squeeze to 5629 and above into this morning. Finally, I’ll discuss the actionable trade plan for tomorrow.