SPX SPY ES for 3/27/24
Penalty Box for Me
I’m pretty disgusted with myself for getting lulled to sleep by the boring action all day and not getting you all in the late day short. You pay for a service and today I didn’t deliver. Missing a trade is fine, but missing a trade because I lacked focus and discipline during the brutal price action is not. I’m going to pause billing for a few days (which means your billing cycle is extended) and will be doing a small giveaway as well as a Mea culpa. I expect more of myself and you should as well. I believe this means that new members will not be able to sign up for a few days as well. I don’t know if that applies to the trial. I’ll recap the action with what I did well, and what I did poorly.
Today was the second day in a row with an incredibly tight range for most of the session which was brutal to attempt to trade. That said, it really was quite technical including the late liquidation. We were primarily watching 5286.5 (top of yesterday’s value) and 5294.25 (bottom of Friday’s value) today to determine the next move, along with yesterday’s high 5288.75. During premarket the long played out absolutely perfectly. You can see the break above 5288.75, the stall at 5294.25, the hold of 5286.5 from above, the reclaim and bid of 88.75 and the resumption higher to 5300.
This should have produced a trend day up as it had in every other similar circumstance for the last 4 months. Instead, there was a major sell off 5300, back below 5294.25, and threatened 5286.5 just before open. As we’ve talked about a number of times, when you expect something to happen, and it doesn’t then you need to pay attention. This is when I proposed the bearish engulfing day in discord this morning.
So far so good.
Our short setup involved failing at 94.25 (above which Friday’s buyers remain trapped) and back below 88.75 and 86.5 (where yesterday’s sellers remain trapped). Cash hours opened, held 86.5 and proceeded to 94.25 (94.5 cash hours high of day) and effectively remained trapped in that range for most of the session.
Sellers made multiple attempts at gaining traction below 86.5 which repeatedly failed but 94.25 was never fully revisited. There truly was no trade in this range other than shorting as close to 94.25 as possible and longing as close to 86.5 as possible until there was a break with continuation in either direction.
From 12:30-1:30 the range got even tighter, and this is where I lost patience and focus. Price chopped between 85 and 89 for an hour. This is how I should have read the situation here instead of tuning out:
All day it was sellers from yesterday who should have been stuck short as price spent almost all day today above yesterday’s VAH and high. The fact that buyers couldn’t gain any upside traction in spite of this was a major red flag. When price then gets trapped below yesterday’s highs, any of today’s buyers from higher are underwater, yesterday’s buyers are not seeing any fruit for their labor yesterday, and Thursday/Friday buyers remain trapped. Unable to base back above yesterday’s high it puts both yesterday and today’s buyers in a situation where they have to consider exiting their longs (liquidating). Additionally, Friday’s buyers are in a situation where they need to consider exiting since we could not reclaim Friday’s range. When the selling pressure remained below yesterday’s high this is exactly what happened, and we dropped 20 handles in 35 minutes. The entire day, and really yesterday, was uncharacteristic of the recent index strength. I should have gone with my premarket read and either been short 92-94 and just sat on it all day or been prepared to call out a short with the strong rejection (from the short setup) of yesterday’s high for the 2nd time at 2:35.
Will sellers see downside follow through tomorrow or was today’s liquidation just what was needed to strengthen the market?
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