SPX Is About To Put in 4 Red Weeks In A Row. Can Friday Reverse It? March 14 Plan
This week started off in the worst way possible for bulls. For 4 months, ES built out a massive “megaphone” pattern and as of Monday morning, support was at 5720. Every major bounce since November came off support of this pattern, including the January 13th multi-week low. Hopes at a clean green week were dashed right out of the gate Monday morning, when ES broke that megaphone down. I wrote last Friday at 4pm: “Bear case Monday: Begins under 5720.” Bright and early at 8AM Monday, we lost this, and put in the biggest red day since August 5th 2024, and the first open-to-close red day since Feb 21st.
As I’ve discussed everyday since then, this massive breakdown means that bears are in control and as I stated yesterday “As discussed above, bears remain in control and bulls have lots of work to change this”. That does not mean there can’t be violent rallies/squeezes (we’ve had a 100 point squeeze each day this week nearly), it just means that they won’t stick until that Breakdown Zone (up in the low 5700s now) recovers.
This selloff Monday took ES to 5570 low, and ES spent Tuesday, Wednesday building out a massive base at this zone (mostly 5573-5569) and this zone became what I call a magnet. After big trend moves, ES loves to build out bases and each base has a magnet (often support) which tests, traps below, and recovers over and over again. This is where my core setup comes in and I make most my money not on those big trend moves, but at these “magnet” levels, trading the Failed Breakdowns over and over.
Today, we flushed this zone hard to 5512 and then (as usual) ES put in a large Failed Breakdown, and we ended up right there again today by the close. I wrote yesterday at 4pm: “Setups of interest though are a Failed Breakdown of the Tuesday low at 5533 (perhaps after tagging 5528 or 5512)". We tagged 5512 at 1:45PM and set the low of day.
ES has only put in 4 green days since February 21st, and not one followed through. Can Friday try another? Bulls have the setup now. In todays newsletter I’ll talk this, I’ll then do a deep dive into some high quality Failed Breakdowns (my core setup) we had Tuesday, yesterday, and today. Finally, I’ll discuss the actionable trade plan for tomorrow.