The Dip Was Bought In SPX. Dead Cat, or Bottom? April 4 Plan

My newsletter yesterday, was entitled: “Will This 2 Red Day Dip Get Bought In SPX, As Usual?”. The answer (at least initially) was yes. Something very important from a technical analysis perspect happened in ES yesterday. I wrote it my Monday newsletter (before the selloff): “Bull case tomorrow: Bulls fully control above 5243-45 triangle resistance. We could dip down there, and it is a normal, regular back-test”. What did we do yesterday and today? We sold down to 5243-45, spent essentially 24hrs basing around this zone, then rallied today.

There is no magic to this, and it is classic charting: We broke out that level after FOMC March 20th, and therefore, you long it on the back-test. Simple charting cuts through all the endless barrage of noise in traditional and social media that will usually put you offside. I concluded my newsletter yesterday by writing: “Bulls held where they needed to - the 5243 level I have waited on for weeks. Now, they need to prove themselves. My general lean is as long as we keep holding we can test 5267, base, then 5280s”. Today, we saw exactly this, we held 5243, then rallied to 5280s, which was high of day.

Is this bounce a sustained low, or just a dead cat bounce? In today’s newsletter I’ll discuss this, I’ll then discuss in more detail two of my three core setups that I have not discussed much recently that were responsible for yesterdays sell and then today’s rally respectively. Finally, I’ll provide the actionable trade plan for tomorrow.