SPX Puts In Its Largest Sell Since Jan 27th. More Red Ahead? Feb 24th Plan
Since Sunday February 9th, ES had been in buy dips mode. We had a variety of dips of different sizes. Some like after CPI on February 12th or yesterday were relatively large (-74 points instantly in the former and -50 points yesterday quickly in the latter). Others were quick 10-20 point pops lower that were bought. The main theme is that since February 9th though, they were all bought. Today saw another one of those sharp dips, and this was the deepest one yet. Unlike the others, it was not bought today.
Its no coincidence as to why we had been in “buy dips mode”, or why we saw a larger dip today to end this cycle. I wrote back on Friday February 7th at 4pm: “For Monday, bulls will want to hold 6016-20. This would allow ES to work back up to range resistance, starting with 6066-70 which is the 1st gateway, then 6093, then onto 6129.” This was two Friday’s ago I wrote this. On the Sunday right after that Friday, ES gapped down, sold to 6016-20, put in a monster macro Failed Breakdown, and rallied to 6129. Two Friday’s later, 6129 was still a key level even into this morning.
As I discussed daily, bulls would retain control until ES lost a significant, well-tested, previously defended support shelf. For today, that would be 6123-6116 which had generally been a support zone all week, with some quick probes below all of which were bought. I wrote yesterday: “If 6123-6116 fails, 6098 is the absolute lowest bulls want to see, below which, we can collapse.” Right after the open today, we lost this 6123-6116 support shelf, and collapse we did to 6020s. For the first time in two weeks, ES had lost a major support shelf and we saw a selloff of a magnitude deserving of that, putting in the largest sell in point terms since January 27th.
The question now, is what next? While the dip was not bought today, it was only one red day after all, and can it get bought next week? In today’s newsletter I’ll talk this, I’ll do a deep dive into three of my core setup types that we saw just in the last two days, which ultimately culminated in today’s meltdown. For the last three days we saw Breakdown Shorts (my rarest setup type and we saw one yesterday and one today which ultimately caused today’s flush). We also saw Back-Test Shorts (my secondary setup type), and of course, Failed Breakdowns (my core setup type). Finally, I’ll discuss the actionable trade plan for Monday.