Will Today's Short Squeeze Be Sold Like The Others In SPX? August 7 Plan
As discussed in yesterdays newsletter, it would not be an overstatement to call the recent selling at least somewhat historic, with yesterday seeing the largest downside range day since September 2022, and the prior three days before today being the largest three day sell since the 2020 COVID crash in March. This is not routine price action - it is once every 4 or 5 year price action. Of course though, large sells and downtrends in ES have an important sibling, and these two are never seperate for long: The Short Squeeze.
Yesterday into today, we saw just what a short squeeze looks like, running from 5120 to 5300+ overnight last night and into today. I was expecting and positioned long for this run today as readers know, and its why I wrote in yesterdays newsletter: “My general lean is that we are in a short squeeze currently. As long as 5191 keeps hold, it remains underway and targets 5252, 5274-76, 5300, then the 5338-42 backtest”. This played out about as perfectly as a move can, and late day yesterday, we held 5191, then overnight we rallied to 5300, dipped into this morning, then pushed up more today to that 5338-42 target *exactly* before selling off.
My newsletter yesterday was entitled: “Has SPX Capitulated, Or More Selling To Come”, and Capitulated it was, at least short term. But will this bounce be sold to new lows like the others? In todays newsletter I’ll talk this, I’ll then talk about what causes short squeezes in downtrends - this is absolutely essential to know and why I was looking long today. Finally, I’ll discuss the actionable trade plan for tomorrow.