SPX Sees The Biggest Crash Since Dec 18th. Lows In Already, or More Ahead? Jan 28 Plan
This week certainly started off with a change of pace from non-stop rally we saw last week: With the deepest sell since the December FOMC collapse. There were certainly clues, however, at the Friday close. The last two weeks saw a rally that would have stood among even 2024’s most parabolic rallies: +340 points in the span of two weeks. This rally was caused - on January 13th - by ES defending support of a 2 month megaphone pattern at 5810. I was long for the vast majority of this, and at Friday’s close I cut those longs, writing Friday at 4pm: “I have decided to finally cut out of my runner from 6020 Failed Breakdown last on Monday at 8pm at 6129ish.”
As readers know, my decision to cut out this long Friday was not random, nor was it luck. Everyday for the last week, I’ve addressed 1 question: What causes sells in ES after parabolic rallies? Readers know the answer: It occurs when ES loses a significant, well-tested support shelf. Heading into Friday, that level was 6135, and I wrote Thursday at 4pm: “I am now for the first time since last Monday cautious on longs” and “Bear case tomorrow: There is also an advanced breakdown short on the failure of 6135”. While the sell started with a trickle on Friday after losing this, it evolved into a waterfall last night, with a news driven gap down open.
I also wrote on Friday: “We are in a very headline dominated market now, and Tape bombs means that ES can flush violently through multiple supports as it did on Monday evening this week.” We certainly saw this to start the week. Today’s bear case was to begin on the failure of 6115, and I wrote on Friday: “Bear case Monday: Bears finally lost a small support late day today at 6135, but have more work to do. On Monday, failure of 6115 now triggers the bear case.” We gapped right through this, and were off to the down side selling to 5940s before getting what always happens after an elevator down move like last night: A Short Squeeze, which lasted all day today as we retraced the leg down.
Today is day #1 of a very volatile week incoming that has FOMC Wednesday, multiple earnings reports, and Tariff headline risk. Are the lows in already? In today’s newsletter I’ll talk this, I’ll discuss my trailing stop methodology and how it got me out of a 100+ point long right near the top Friday. Finally, I’ll discuss the Breakdown Short setup we had on Friday afternoon that started this all.