Will Todays Dip In SPX Get Bought Like All The Others? Oct 8 Plan
October - much like September - started off with a bang where ES put in a deep flush on the 1st trading day of the month last Tuesday, with ES flushing 88 points last Tuesday. Much like the first week of Septembers dip though (albeit much more mild), ES did what it usually does 80% or more of the time in an uptrend: Trapped shorts, and it got bought.
This was not a shock to newsletter readers and I wrote in my Thursday 4pm newsletter: “If I had to provide a general lean though, it is to defer to the macro trend. As long as 5744, 5734 holds, we head higher. This would target 5772 1st, then 5782 2nd. Maybe dip there if bears want, then on to 5800+”. We saw exactly this on Friday. Friday morning at 3:30AM we held 5744 exactly, then rallied to 5800+ target by Fridays close. Saying this dip was simply bought however is likely an oversimplification, because what ES really did last week was build a large consolidation all week, largely between 5805, and 5740.
We closed Friday right at resistance of this range and I was looking for a pullback to start this week from 5805 for what I call the “Monday Morning hangover”. I wrote in my Friday newsletter: “ I am always a little hesitant to buy first supports down on Monday since there is the “Monday morning hangover effect” in ES especially after a strong Friday close. ES loves to give it back Monday.” I then added: “Generally, I see 5805 to 5740 as being a massive consolidation range from here (flag). This could very easily fill out more - even for days so do not be shocked if we retrace all the way to support again Monday”. This is exactly what we saw today and while it took its time, we sold down to 5740 by 2:45PM, filling out the whole range.
Is today’s dip to range support just going to setup another big squeeze? In today’s newsletter I’ll talk this, I’ll do a deep dive into the setup on Thursday that caused the Friday squeeze as this was a great example of a variant of my core setup: The Failed Breakdown (I call this variant the compound failed breakdown), provided to readers in advance. Finally, I’ll discuss the actionable trade plan for tomorrow.