Three Red Days In A Row For SPX. Can It Manage A Green Friday? September 8th Plan

After spending a full week chopping between 4490-4540, ES finally chose a direction yesterday, and it was down. As I’ve discussed on Twitter, September is the most bearish, volatile week, difficult month of the year, and it started off in form. As readers recall, 4493-87 was my key pivot this week, with failure triggering shorts and putting bears in control. I wrote on Tuesday. “Bear case tomorrow: Easy and starts on the fail of 4487”..adding “If 4487 fails, that means the base has broken down, and implies ES will need to retrace a large chunk of the late August rally”.

This is what happened and we retraced 61% of the August rally. I wrote yesterday: “My general lean for tomorrow is we can try the backtest at 4493-85, after building a messy base” and “With rollover coming up, expect complex trading”. We certainly saw this today and we spent this morning in very messy, complex chop - likely a consequence of the upcoming futures rollover - before slowly grinding higher for the remainder of the day.

After putting in three red days now in a row though, can bulls finally get some momentum on this bounce and put in real a green day/relief rally tomorrow? In today’s newsletter, I’ll talk this/the path ahead, I’ll then do a deep dive on the details of the setup that got me short yesterday, then I’ll provide the actionable trade plan for tomorrow.