SPX Puts In 2 Green Days In A Row For 1st Time In A Month. Can It Keep Going? March 18 Plan
Last week concluded with a very rare 4 red weeks in a row for ES - for the first time since April 2022 at the start of the last bear market. More profoundly, since the current top on February 19th (nearly a month), ES had been unable to put in more than one consecutive green day a time. That is three full weeks without two green days. Its not a coincidence though; last Monday March 10th ES broke down a massive 4 month “megaphone pattern” with support at 5720 at the time. This has yet to be back-tested.
After selling over 200 points into last weeks low on Thursday, I was looking for ES to try one of those elusive green days on Friday. I had good reason to expect this. Remember all short squeezes/relief rallies in a downtrend are caused by my core setup: The Failed Breakdown. Price sets a big low, flushes it, recovers, and it squeezes.
We saw this at 2pm on Thursday when ES flushed the major Tuesday low of 5534, sold to 5512, then recovered it. This got me long and I wrote on Thursday at 4pm: “We have an active Failed Breakdown. My general lean is we can re-test 5558. If bulls can clear, we can work up the levels to 5584, 5599, 5658-60, then 5703-10.” This played out incredibly well, and we got to ~5650 by Friday’s close.
The big task for bulls into today though would be to break the no two green days in a row curse and specifically try to back-test the multi-month megaphone pattern which was up at 5703ish now. I wrote on Friday at 4pm: “Bulls got that elusive green day, but now is the hard part: Follow through. My general lean is bulls can correct/consolidate on Monday and ideally bulls want to defend 5599. This would setup the next leg up to 5654, 5666, then 5703-06.” Overnight last night, we held 5999 *exact* then ran to that full target set.
Can it keep going? In today’s newsletter, I’ll talk this, I’ll do a deep dive into the Failed Breakdwon we had on Friday that produced the major 100+ point squeeze we saw Friday (we see these multiple times a week even in a bear market). Finally, I’ll discuss the actionable trade plan for tomorrow.