SPX Snaps Its 6 Red Day Streak. Can The Bounce Hold? March 3 Plan
My newsletter yesterday was entitled “6 Red Days In A Row For SPX. First Time Since April 2024. Bounce Incoming?” The answer, was a resounding yes. As stated, this was the first time since April 2024 that ES put in 6 red days in a row. This 6 red day streak began one week ago, last Friday, where kicked off this sell bounces cycle with something in itself quite rare: An open-to-close red trend day. You will note that of the 6 red days, only last Friday was a full open-to-close red trend day.
The fact the sell bounces cycle began last Friday was no coincidence. Remember that selloffs begin when ES breaks down a mature, previously well-tested, heavily defended support. Last week all week, ES built one of these bases with 6123-6116 support. I wrote last Thursday at 4pm: “If 6123-6116 fails, 6098 is the absolute lowest bulls want to see, below which, we can collapse.” Collapse we did, and a week of sell bounces commenced.
Thats not to say there weren’t bounces, there were many, and despite the 6 red days in a row, this selloff was - as all selloffs in ES are - nonlinear. This is why “bears”, don’t make money even in bear markets, because ES does not sell in a clean path, rather it sees frequent squeezes (all caused by core setup: The Failed Breakdown, which is just as lucrative in downtrends as uptrends). We saw a 100 point short squeeze Tuesday this week. A 70 pointer on Wednesday, a 50 pointer yesterday and most the week was spent rangebound mostly above 5938. The difference is these bounces were sold.
Today, bulls had a chance to stick one and they did. I wrote at 4pm yesterday: “We are 6 red days in a row in ES and probably overdue for a bounce soon. Getting a bounce, and sustaining a bounce are two different matters though. My general lean is as long as ES can hold 5875, 5865 lowest, ES can try a pop up the levels to 5914-18, then 5938-42. 5938-42 needs to recover to produce a sustainable squeeze.” We started today with a squeeze to 5914 which was the morning high, sold back to new lows, put in a monster Failed Breakdown, then squeezed again to complete the target set and hit 5938-42 by the end of the day.
This means ES has snapped its losing streak. Now, can it sustain? In today’s newsletter I’ll talk this, and I’ll do a deep dive into the sequence of setups that caused yesterdays flush, then today’s squeeze. This incorporates two of my key setup types: The Failed Breakdown and the Back-Test Short. Finally, I’ll discuss the actionable trade plan for tomorow.