Will Nvidia Earnings Make Or Break The SPX Rally? Nov 21 Plan
As I frequently discuss in this newsletter, ES exhibits highly predictable tendencies, and when you trade it long enough, you start to see the same cycles play out over and over. One of those cycles is that after “elevator down” selloffs like we saw last Friday, ES usually follows with a vicious short squeeze or relief rally to re-test some of the levels that failed on the way down. This week saw that short squeeze and relief rally, running 100 points yesterday and fading today.
After last Friday’s non-stop sell, I warned readers about a squeeze to start this week, writing on Friday at 4pm: “As readers know, elevator down days like today have a closely related sibling: The Short Squeeze and its inevitable will we retrace a good chunk of this sell. We have yet to have the first post sell-off short squeeze and if its going to occur it would likely be from this general area”. As readers know, by “this general area” I was referring to the 5886 level, which would be this weeks critical magnet to trade. Every month typically has a magnet level that price operates around, and traps below over and over. In October it was 5740, and this month, 5886.
After a major trap below 5886 yesterday morning, ES put in a monster 100 point squeeze, which got to 5958 by this morning. What did we do from there? Unsurprisingly, sold back to the 5886 magnet by 10am this morning.
I wrote yesterday at 4pm when we were 5740: “We may not be done with 5886 yet - it is common for these magnet levels to test many times and even though we tested it Friday, yesterday, and put in two failed breakdowns today, do not be shocked if it makes a few more appearances this week”. It held, yet again.
Can it continue to defend? Much will depend on Nvidia earnings today. In today’s newsletter I’ll talk this, I’ll do a deep dive into all the action we saw at the 5886 level since Friday. This singular level saw all three of my setup types - one after the other - at the same spot, which makes for a fantastic educational opportunity. Finally, I’ll discuss the actionable trade plan for tomorrow.