SPX Is Coiled Very Tight. The Calm Before The Storm? August 27 Plan
From August 5th until last Monday, traders witnessed the most significant rally of this entire bull market cycle that began in October 2022: An incredible 550 points in two weeks, and we saw nothing of the sort yet in this cycle. It is also no coincidence when it occurred, right after the largest selloff from mid-July to August 5th of this bull market cycle, down over 10% in two weeks. The two aren’t unrelated and the selloff can be seen as the “rubber band” that was pulled back and released for this rally.
The “release” was indicated in the first week of August by a massive weekly bullish hammer candle (which is why I entitled my newsletter at the end of that week: “Bullish Weekly Hammer Candle In SPX. Can It Follow Through?”). Since last Monday however, ES has been in consolidation mode, resting, trapping and building a sideways base to reset after this the monster rally. I warned about this yesterday, writing: “We are chopping and 5654 to 5588 is just pure noise now. Over-trade in this, lose money. My general lean is always to defer to the trend. While we could easily fill this range out all the way to the downside, as long as 5630 holds (5619 on any traps) we can revisit range resistance at 5655ish”. This morning, we put in a standard downside trap below 5619, recovered then rallied to 5650 high of day.
We are currently coiled incredibly tight now, and a large move is imminent. Nvidia earnings tomorrow could be the catalyst. What way will it be? In today’s newsletter I’ll talk this, I’ll do a deep into the countless failed breakdowns we have had in this range (my core setup, and ranges are the best place to learn them). Finally, I’ll discuss the actionable trade plan for tomorrow.