Three Red Weeks In A Row For SPX: Capitulation, or More Red Ahead? April 22 Plan

My newsletter yesterday was entitled: “The First 5 Red Day SPX Stretch Since Oct 2023. What Does Friday Bring?”, and few could have predicted what the overnight session into this morning brought, with the most volatile evening/overnight price action quite easily in the past year, spurred by sudden headlines out of the Middle East. As usual though, when volatility picks up, the core building blocks of price action/technicals remain the only guide post.

I wrote last night at 420PM: “Bear case tomorrow: Straight forward and starts on the fail of 5039 now….. After this, I’d be looking short 5037 for a move down”. “Move down” was probably an understatement, as we flushed 85 points in the span of an hour or two. This selloff was triggered by the breakdown of the 5045-39 zone we spent the last two days battling at. However, as I frequently discuss, whenever there is a melt-down, there is a short squeeze not far behind it, and in this case, it was not far at all, with ES retracing the entire move back to 5045 magnet by the morning. Anyone who did not look at price from 8pm to 8am this morning would not know anything happened. From there, we put in a clear backtest of 5045 breakdown level, and resumed lower.

We are now 3 red weeks in a row, and 6 green days in a row. Statistically, a very rare feat for ES. Can bulls turn the tide around Monday? In today’s newsletter I’ll talk this, I’ll then discuss the “anatomy” of last nights melt-down, specifically how price transitions from testing a zone, to trapping a zone, to flushing it. I’ll then discuss the actionable trade plan for Monday.