Yet Again, SPX is Coiled Tight. A Big Move Is Coming. What Way? Nov 14th Plan
This week started off with the first pullback leg after last weeks historic 330 point rally - the largest green week of the year and the biggest postelection rally in S&P 500 history. From last Monday until this Monday, we essentially had no sustained pullbacks that lasted more than an hour or two. This changed on Monday and we finally got a sustained 50-60 point dip continuing into yesterday.
As I discuss at length in this newsletter, the most foundational of all trading skills is knowing what regime the market is in (buy dips, or sell bounces) and not fighting it until evidence suggests the regime changed. Understanding this not only prevents you from fighting trend (ask people shorting last week how that went) but also keeps most your trades aligned with the direction they are most likely to work. For the past week, this has meant buy dips, and we got one yesterday. I wrote on Monday at 4pm: “Bulls will want to see 5985-88 lowest hold on any deeper corrections”. Yesterday, we got a dip to 5986 low of day, then bounced.
Today, the task for bulls would be to hold that low after CPI. I wrote yesterday: “The ultra bull case for tomorrow is that this current consolidation we’ve been in since Friday is a bull flag (and it is a bull flag, its just a question of whether it breaks out or not)….This would then mean revisiting 6032-38 from here, perhaps final reaction, then on to 6051 to revisit the ATH”. After CPI hit, worked our way up to 6032-38 where we spent nearly all afternoon basing out.
After all the drama today though, we are ultimately closing not far from where we did yesterday and we continue to flag out. Will it break higher? In today’s newsletter I’ll talk this, I’ll do a deep dive into yesterdays very rare session where we had all three of my setup types in the same day, providing a strong opportunity for education. Finally, I’ll provide the actionable trade plan for tomorrow.