Three Red Days In A Row For SPX For Second Time in 2024. Is It Time For A Bounce? Feb 22 Plan

Last week started and this week ended with something that in normal market conditions is very routine, but in this parabolic bull market, has been a rarity: Two red days in a row. Since January 4th, this had only happened on two prior occasions and both those dips were promptly bought for multi-day runs. This weeks dip presented a fantastic short setup on Monday.

Readers know my entire trading system is based on never needing to predict when things like sells will happen, rather reacting instead to established level failures. While most traders frantically shorted every new high for weeks, the alternative is simply to wait for the market to tell you it wants to sell by losing a support, then following. It was this approach that got me short back on Monday, and I wrote in the Sunday newsletter: “Bear case Monday: Begins on the fail of 5016-18..After this occurs, I’d consider short perhaps 5010 for a move down the levels” and we flushed to 4976 target quite rapidly.

After this flush, we spent all day largely basing here, resting in a 15 point range all morning in what had been the choppiest day of 2024 by a long shot. We are now three red days in a row, for the first time since early January, with Nvidia earnings after hours today. Are we getting close to a bounce? In today’s newsletter, I’ll talk this, I’ll then do a deep dive into yesterdays 5018 short setup as it was the best example in many months of my third (and most difficult) setup type: The breakdown. I’ll then discuss the actionable trade plan for tomorrow.