Trade Plan for 10/2
The weekly post should be reviewed prior to this. Link to The Week Ahead
Today on SPY 0.00%↑ was all about yesterday’s spike. The base of the spike was 5798.75 and the extreme of the spike (high of day in this case) was 5820.25. This sat right at a massive spot for multiple reasons. Last Thursday’s excess sat above 21.75 and Friday’s high (also an excess high) was 21.5. I warned on X last night not to get too bullish until bulls proved they could drive through 5820s-30s. We can blame today on Iran launching against Israel and it certainly played a major role in the level of aggression in selling, but the Asia session buyers did nothing but look above and fail the key 5821.75 level.
The full commentary for your educational purposes":
We can see how weakness was underway following the look above and fail, but certainly the news about Iran launching RIGHT at the open played a role in driving price right through the spike base.
We always get cautious into top of range and had been monitoring VX futures for a large move higher for some time. While one can’t regularly predict what is going to happen, we can at least contingency plan for what may happen and understand those locations in which we must remain cautious.
There still isn’t a reason to be meaningfully bearish. We had been looking for 5730s-40s for a dip buy since last week, specifically the 5733.5-5738.5 range.
The dip was bought hard there twice today as we formed a bit of a box. Sellers were able to defend against a rally into the close and trap price back within the box which makes things rather interesting for tomorrow.
I have my eyes on a setup for a swing long into the end of the year that could play out tomorrow, but sellers have an opportunity here to cause some technical damage that would preclude any swing longs from being fruitful. This could, in fact, turn into a swing short of a decent size if sellers press. We will, as always, be prepared to react and stay on the right side of the trade.