The Week Ahead for SPX
It was quite a wild week for the indices. In last week’s post and the video, we discussed the critical nature of 5385 to the low 5400s on ES. The key spot is best seen on SPX, for which I’ve used the US500 chart for demonstrative purposes. We can see what happened in early August when it weas lost.
Coming into the week we planned to be outright bearish if we were making lower highs and lower lows below 5385 ES. My plan was to initially look for shorts (if a setup were to present) closer to the 5490s if we traded higher first. We would begin hunting swing lows if we saw a “large and glorious capitulation” or we formed a multi-day balance.
I was rather loud about being bearish in the Discord through Tuesday as I felt we had not yet seen the last of the forced selling. The short setup played out on Wednesday morning (a look above and fail of Tuesday’s high and failure to sustain above the 5501.25-5506 spike), and actually caused the large and glorious capitulation. We sold 90+ handles with nearly no green candles on the 5-minute chart for nearly 90 minutes.
I don’t think anyone would have expected what came next. Sure, it hit the bottom of the box that we used for the day, but to rally 150+ handles off the lows after a 90+ handle sell was quite spectacular. It was somewhat similar to August 5th, which rallied 160 handles off the overnight low in almost a straight line, with few opportunities and little time to go shopping for any individual names one might have wanted to buy.
From Tuesday night’s plan:
One can see that ES hit the bottom of the box and an absolutely ferocious bid came in which has now extended to 230 handles.
We have FOMC on Wednesday and the Fed will be cutting rates with the market at or near all-time highs. It seems like bulls expect cuts to be bullish and propel us to 6000+ into the end of the year, while bears point to historical data which suggests that cuts are bearish. It is far more nuanced than that, and fortunately for us we let price tell us what we need to know. I will be monitoring a very high time frame box to make my own assessment into and out of this week.
Be sure that you have read the free series I’ve started introducing Volume/Market Profile. I will continue to add archives of free content as it will be easier to find than searching for old Substack posts. You can find it halfway down the page at the following link PharmD Capital