SPX Finally Snaps Its 4 Green Week In A Row Streak. Buyable Dip, Or More Red Ahead? Sept 9 Plan

Note: This is a resend of the newsletter for Monday September 9th, originally sent out on Friday ~4pm, for those who did not receive.

After a barn burner August where ES put in the largest/steepest rally of this bull market cycle that began in October 2022 (550+ points in 2 weeks), ES began September with the first healthy pullback leg in over a month. This pullback was triggered on the loss of 5630 then 5585 back on Tuesday, and I provided this setup to readers last Friday at 4pm when I wrote: “Bear case Monday: There is no bear case until this flag breaks down at 5585-90. On a short-term basis, 5625-30 failure is likely a short though”. We had spent all of August largely basing above 5585, and this failure on Tuesday triggered shorts and put bears in control for the week.

This selloff took us down to the 5492 level yesterday, and 5492 is where we broke out of back on August 15th, and this was a key pivot for the last two days. I wrote in yesterdays 4pm newsletter: “5494 is major support still. We already tested this today and got the bounce, so this level is no longer fresh. Its risky to buy directly (especially since we have NFP tomorrow morning, so we could make a dramatic move that cuts through levels easily). I’d rather see it flush and recover, and doing something like testing 5482 or 5474 and reclaiming would be an setup that is of interest”. Overnight, we got precisely this setup, dipping to 5474, reclaiming 5492 this morning, then triggering long to 5528+. This was a classic example of my core setup and edge: The Failed Breakdown.

5492 was not invicible though, and after 2 tests yesterday and a failed breakdown overnight, it finally cracked triggering a hard melt-down. As I wrote yesterday: “Bear case tomorrow: Begins on the fail of 5492. As always I don’t chase. Generally, I’d want to see 5493 tested/one more failed breakdown of the zone. After this, I’d consider short perhaps 5486”. I added: “Below 5492 I consider “knife catch protocol” to be activated and I’d be careful with all longs. As we saw on Tuesday, when price goes into knife catch mode, all supports by definition will fail”. We melted down hard afterwards to 5410s.

This means that ES has finally snapped its 4 week green week streak, putting in its first red week. In today’s newsletter I’ll talk what (and where) bulls need to do in order to end this correction. I’ll also I’ll do a deep dive into yesterdays action where we - incredibly - saw all three of my setup types in a single session. This is highly valuable for education. Finally, I’ll discuss the actionable trade plan for Monday.