SPX Puts In A Green Week. Can It Follow It Up? April 14 Plan

Its been a historic week of trading and the 4th most volatile week in 60 years, with Wednesday seeing a staggering 650 point squeeze in a single session. When volatility is this extreme we have to simplify markets down to basic building blocks and not try to trade everything, but rather just trade specific, easy-to-identify features of price action where we have an edge. As I’ve discussed at length, in downtrends ES really only does two things: It goes “elevator down” which refers to violent sells that are short-lived but cover heavy ground, then it short squeezes.

Short squeezes are caused by my core setup type: The Failed Breakdown. In these markets - in order to keep things simple - I choose to only trade the Failed Breakdowns/squeezes and everyday this week we have had at least one 200 point squeeze and we saw this “elevator down into short squeeze cycle” over and over. On Tuesday at 4pm (after selling 350 points), I wrote: “Below 5945 is 4896 and this may be the final support before ES makes a new low. I’ll be watching the reaction at this level. If its an organized sell into it, I may give it a bid, but if we are melting down on yet another huge trade war headline, let it flush perhaps down to 4875 and recover to attempt longs.” On Wednesday at 130AM, we hit 4875 exact, put in a Failed Breakdown of 4896, and squeezed 650 points. Short Squeeze, and it remains the low to this day.

This would mean “elevator down” was probable yesterday. I wrote Wednesday at 4pm: “I will warn now, there will be a deep elevator down sell after this squeeze that retraces a massive chunk of it.” We got this yesterday, seeing a huge flush back down to 5155 major support. I tweeted that this was a big support at noon or so yesterday and 5214 would see another squeeze. What did we see in the afternoon from there? Short squeeze from 5155 to 5330 or so by yesterdays close.

Heading into today, it would be up to bulls to keep this going. I wrote yesterday: “I try not to have any lean in these markets, but if I had to give one, its that ES can defend 5248-52 and consolidate more 5340-5252. From there, we can retrace today’s sell with my target being 5377-80, then 5416, then 5468.” This morning at 10:30AM, we held 5248-52 exact, and rallied to 5416 which was the high of day.

That’s a green week for ES. Can it make it two? In today’s newsletter I’ll talk this, I’ll do a deep dive into Wednesday’s 600+ point short squeeze, as it was caused by a fairly unorthodox Failed Breakdown, which was taken into overdrive by the Tariff Pause headline. Finally, I’ll discuss the actionable trade plan for Monday.