Will The Holiday Crash In SPX Get Sustainably Bought? Dec 30 Plan
NOTE: This is a resend of the newsletter for Monday December 30th, originally sent out on Friday at 4pm, for those who did not receive.
My newsletter yesterday was entitled: “SPX Is At A Huge Inflection Point. Will The Santa Rally Run Out of Steam”. The answer, was yes. As I made it abundantly clear starting 1 week ago today (when we were sub 6000), that this holiday week would be defined by a singular level: 6100. This level represented the Back-Test of a 1.5 week flag structure that we broke down on FOMC day December 18th, to trigger what ended up being the largest red day of 2024 down to 5907 that day.
Break-down zones like this however, become magnets to be back-tested before further selling and its for this reason that the plan this week was clear: Get long until the 6100 back-test, then sell. I wrote last Friday Friday December 20th: “My general lean is that ES can make its way up to the back-test of 6099”.
It didn’t take long from Friday, and by the close Tuesday, we tagged 6100. We then spent Christmas Day and most of yesterday testing this level, before rejecting hard lower today. For those who didn’t hold short off 6100 however, today provided an additional opportunity to get in. I wrote yesterday: “If 6066 fails, we can start a hard rejection down.” Bears decided to make a Holiday apperance, we lost 6066 this morning, shorts triggered, and down we went.
Will this get bought sustainably? In today’s newsletter I’ll talk this, I’ll do a deep dive into one of the questions I get most often especially pertaining to my core setup: The Failed Breakdown. Specifically how do we actually know when the level is reclaimed to trigger the entry. I’ll use the monster long we had on Monday morning (a setup provided to readers) as a reference point to discuss this in more detail. Finally, I’ll provide the actionable trade plan for Monday.