SPX/ES/SPY setups for 10/18

Reminder updates to be sent in chat in the AM

The overnight session last night played out perfectly according to last night’s plan for the big short. I had said “On the short side I will consider shorts if we trade below 4398.25, maybe weaken 4392 with a test and then fail a back test of 4398.25 from below. I’ll be wary of 4392 possibly holding again but if it is lost then the possibility of seeing 4375.25 is real.”

Above can see the near test of 4392 (still weakens it), then the level completely broken (some may have been using 4390 and seen this as a false breakdown), and a perfect lower high at exactly 4398. This is a perfect example of how not all levels are created equally. Many traders may have seen that second circle as a false breakdown of a key level and gotten long. In this instance the active trade setup, however, was the P profile breakdown so once 4398.25 was offered from below it was a clear short. The 4375.25 target was met, and exceeded, but as I said in AM chat I was NOT looking to chase new shorts down near our weekly inflection range of 4365-69.

The long setup from the post ended up playing out as well but much later since we had traded so low overnight. The reclaim of 4398.25 targeted 4411.5 which was met and exceeded as well. I had said:

“If we trade below 4398.25 overnight and then reclaim it late in the session before cash open or just after cash open, then a value traverse to 4410-11 is reasonable to expect (requires real acceptance back above). This is an absolutely golden setup in my opinion as it would get a long in at a great entry with then the possibility of holding runners for an upside breakout of the balance with trapped sellers providing the energy needed.”

I had posted the potential long setup on a reclaim of yesterday’s lows in chat, though I suggested that I would lock profits quickly and not let a trade go red. I admit I did not expect such an aggressive move off the lows this morning, even though it perfectly held our weekly inflection range. Once it broke the highs of the first 30 minutes (the 30 min operning range high) there was no real pullback higher low to enter if you didn’t slap the reclaim of yesterday’s lows (which I don’t advise) until we reclaimed and bid our 4385.5 level from above. Even this long would have been somewhat questionable still trading under 4398.25. I would rate either AM long setup as a “C” at best, even though longing the 4365-4369 range ultimately ripped for 50 points I am looking for HIGH probability trades with very small and well defined risk.