Three Red Weeks In A Row For SPX. Green Incoming? August 5th Plan

Last week, the big headline was that on Wednesday, ES put in its largest red day since December 2022, and its first >2% red day in 357 days. This week, ES outdid itself, putting in a 230 point two day dip, the largest two day selloff of the year by a good margin. Overnight last night, we saw the latest flush of this leg which began at about 1130PM and took us down another 120 points today. As I wrote yesterday: “It would not shock me at all if ES still has another 70-100 point move left in the tank this week”. It certainly did.

The “cause” of the overnight flush in technical terms was no surprise. We closed yesterday right at support of a core rising channel support dating all the way back to April, and it was the 4th time since last Thursday we tested it. It is why I wrote yesterday: “5448-52: Support of the large purple channel structure that caused the recent macro leg up…This is a massive support now, and bears resume control for the next macro leg down below here. We closed here today”.

I also wrote yesterday: “Bear case tomorrow: Begins on the fail of 5448-52”. After we lost this last night, ES wasted no time and bear case/shorts commenced producing one of the most violent sells of the year. That makes 3 red weeks in a row, for the first time in 2024. The last time we did this was in April, where ES set a multi-month low. Can we bounce? In today’s newsletter I’ll talk this, I’ll do a deep dive into the quality short setups we had this week, and specifically my approach to shorting (breakdown short setup). Finally, I’ll discuss the actionable trade plan for tomorrow.