The Calm Before The Storm In SPX? Big Catalysts This Week. Oct 29 Plan
In my last newsletter (and almost every newsletter since) I’ve said if there were three words to describe all the price action since the September 6th low, they would be buy dips mode. As I say here non-stop, the most important thing to know is if ES is in buys dips, or sell bounces mode. Everything else is secondary. Since Septembers low, there’s been a multitude of dips of various shapes and sizes, the overarching theme though is that they get promptly bought.
Most staggering is from September 6th to October 21st, buy dips mode was so acute that ES was unable to put in more than one consecutive red day in a row. Last week, ES managed to string together a few more dips, but they were - as always - bought. Last Thursday for example, ES sold down to 5820. What happened to this dip? It was bought. I wrote in my last Thursday newsletter at 4pm: “The bull case now would probably look something like pop to 5865-68, perhaps one more dip. From there, we break out, and this would target 5882, 5892”. We rallied to 5892+ or so Friday morning, then sold hard to 5835 Friday afternoon.
What happened to this dip? The usual, it was bought, and I longed on Friday at 2pm. I provided this setup in Thursdays 4pm newsletter when I wrote: “For tomorrow 5842 is first down. If we can dip to 5838 then reclaim it I’ll probably try a long again”. We saw this on 2pm Friday, where we dipped to ~5836 low of day, recovered 5844. As readers know, I held this long over the weekend and we were at 5880 by the open today and we then spent all day chopping 5865-5885.
Ultimately though, ES remains in a large 2 week consolidation, mostly between 5900-5910, and 5835 or so. With multiple huge tech earnings this week, its unlikely to last. How will it break? In today’s newsletter I’ll talk this, I’ll go over a setup of mine that I don’t discuss frequently enough: The Back-Test Long, with a new diagram. Finally, I’ll discuss the actionable trade plan for tomorrow.