The Dip Was Bought In SPX. Is The Bottom In? July 15 Plan
Note: This is a resend of the newsletter for Monday July 15th, originally sent out on Friday at 4pm, for those who did not receive
Yesterday, ES did something it had not done in any real sense since June 28th: It put in a red day, after a historic push higher. For readers of this newsletter, the fact we pulled back should be no surprise and as I said daily for weeks, ES puts up a bright neon sign when it is ready to pullback by losing a support. We can stay long, until that trigger hits, then, try shorts. Yesterday, we got the first short trigger when 5668-72 failed, and down we went for a nice multi-level short, resetting price and setting up a fantastic buy opportunity today.
Yesterdays dip lead to what always happens after a dip in ES bull markets: The dip was violently bought. I wrote in my newsletter yesterday: “First support down from here is 5630-33…. This level is very well tested now, and therefore weak on any future tests. I am not interested in bidding it again, but if we get a failed breakdown of today’s lows (perhaps down to 5624) then recover, I’d consider adding on that setup”. This morning, we got this exact setup to trigger longs, flushing 5630 to the low 5620s and recovering. This triggered longs, and lead to a monster rally that lasted into late afternoon.
Where we closed today should also be no surprise. I concluded my newsletter yesterday, by writing: “My general lean is that ES can try to defend the 5630 level, then work on a relief pop. This would target 5653, 5658, then 5668-73”. By 10:15AM this morning, we had tagged 5668-73 target and broke above. We then backtested it precisely from above at 1am, and squeezed to 5708 before closing (no surprise) right around 5668-73. This was a fantastic long, but what comes from here? Is the bottom in? In todays newsletter I’ll discuss this mornings long setup (it came off my core setup, the failed breakdown) and I’ll also discuss yesterdays short setup. Finally, I’ll provide the actionable trade plan for Monday.