Week of 4/21/2024 for SPY SPX ES
Week of 4/21/2024 for SPY SPX ES
There Was Indeed Blood
SPY 0.00%↑ QQQ 0.00%↑ IWM 0.00%↑ DIA 0.00%↑ had pretty nasty weeks. The picture caption from last week’s plan was “There Will be Blood?” There was indeed blood. While many were calling for SPX 6000 directly, we had been monitoring the major topping process that was taking place. We were not surprised at all. In fact, last week’s plan referenced January of 2022 and the bloodbath that ensued following the week AFTER value had overlapped lower 2 weeks in a row at the top of an uptrend. Last week indeed ended up pretty similar.
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In the FREE post from 3/23 seen HERE the QQQ look above and fail of the box indeed triggered weakness. The box ultimately resolved to the downside. The DIA box backtest, failure at supply above, and 2nd back test of the box failed and triggered the “trap door” setup we had been monitoring. IWM failed to find bids above 210.58, and losing 199.5 after that fail indeed proved “problematic” for bulls. UUP 0.00%↑ DXY hit the 106-107 target, and TLT 0.00%↑ indeed failed right back down. Also as expected, SPY took an extra week to show itself, but the safe and easy short setup remained valid.
If you caught the short early, congratulations. The easier short was the above if you didn’t.
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So now what? Can we buy the dip yet, or has the weakness only begun? If/when we find a swing low, will it produce new highs or will it just be a weekly lower high for continuation lower? Let’s discuss.
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Levels - Note not all weekly levels will be used each day but they could all present as part of an “active sequence” within a given day(s). Focus on the bold levels on high time frames
Complete Levels/Ranges:
5185.75
5172
5147-5152.5 (5150 reference 4/7 week low)
5133.75
5122-27 (potential failed escape scenario. Will cover if seen- major look above and fail scenario for a swing to new lows from here)
5120.75 reference last week’s VAH)
5112 (2nd potential failed escape scenario) MTD dVAL
5101-5105* Last week’s VPOC, YTD developing VPOC, prior major level
5085-5089
5072.5 feb VAH
5063-5066.5
5047-5052.5
5032.75-5039 reference last week’s VAL ETH and RTH respectively
5021.25
5010
4997-5002.5 2/4 week LVN and 2/7 single prints.
4991 reference Friday’s RTH low.
4977.5-4982.25
4957.25-4960 - Jan high and VAH, 1/21 week VAH
4936 YTD dVAL (can use 36-40)
4916
4899-4904.25 (The Red Wedding)
4890-4892.75 (Battle of the Bastards)
4870.5-4874.5 (Winter is Coming below)
4859.75
4834.5-4837.5 (How you felt at the conclusion of the final season of Game of Thrones below)
4824.75 Potential trap area below 4840 that we discussed LONG ago
4814-4818.75 Final Initiation of the 4840 breakout and Jan open. The year goes red
4808 2021 high
COMMENTARY:
Every index hit an absolutely massive spot on Friday. By all means we absolutely should see a relief pop from here. I will use an analogy that will also serve as a teaching opportunity. We often talk about overnight “inventory” which is simply the positioning of participants from overnight. If futures on a given night are trading lower all night, then inventory is characterized as being short, and vice versa. I’ve also discussed “inventory correction.” This is simply a pullback. If the market has been straight UP all night, and inventory is fully long, then a pullback in price into the open or at the open is reasonable to expect. In this analogy, imagine an overnight gap down of 1% and at the open, the market immediately drives lower with continuation. In this situation inventory was fully short and there was NOT an inventory correction (pullback higher). In these situations, you simply deactivate the buy button as the market is extremely weak. In this analogy, inventory for days in a row is extremely short AND we are at a MAJOR spot. Thus, if we continue lower from here directly, then the market should be considered extremely weak.
There is no need to front run a long. After such a nasty sell, a V shaped recovery to new all-time highs with no pullbacks to buy is quite unrealistic. Before potentially reversing, it is more likely that the market finds a few days of balance (a box), and then decides whether to reverse higher or continue lower.
In order to bring the daily to balance, we need to take out a prior day’s RTH high. At minimum. We will also need to overlap value higher on a daily basis. At minimum. Those would be the first objective signs of balance before we can reverse. A look below and fail day/week (just like a look below and fail 30) is ALWAYS a better setup for a reversal long. I had mentioned I would take a look at a few NQ names this weekend in case we get a relief bounce. They look horrible, absolutely atrocious. Individual names find bottoms before the broader index. If you can find a tech name that looks like it has started that process, then have those names ready. The ones I looked at looked horrendous. The ideal scenario for an interim tech bottom in my opinion would be trading lower first and then reclaiming and bidding last week’s lows. 17113.25 to the tick is a major line in the sand for me. Looking at volume profiles, 17040-17069 could potentially produce this. I feel that 16994.25-17010.5 is a more reasonable candidate to produce a more durable look below and fail. 16825.25 needs to be marked forever. It is “The Red Wedding” on NQ (768 is the Battle of the Bastards). 707 is “Winter is Coming" below.” Keep 723, 662, 566, and 419 on your charts long term “just in case.”
16860-16978 is very much worth watching as well for a strong reaction without making it to 825.25. Any of these spots >=825.25 and back over 17113.25 would probably indicate balance phase has been entered and we can look for longs. I will be very hesitant for any swing longs on individual names if we trade higher first. I will be looking for a lower high to short back down.
So where would I look for a lower high to short on ES?
First off make sure you’ve marked the AVWAP hand-offs on NQ that I posted in Discord. NQ is the driver and we need to monitor it. In addition to the VWAPs, monitor NQ 17400, 17439, 17538, 17649, 17776, 17831, 17928 and 17978 to the upside. 18055 should be on your chart forever. If NQ remains supportive of downside continuation (really needs to clear and SUSTAIN a bid above 18055 to really negate this bearish move.
If ES trades higher and can’t clear 5032.75-39 then I would expect weakness to continue directly. ES needs MUCH higher to convince me that this isn’t a continuation short. Like NQ needs 18055+, ES really needs 5180-85+ on high time frames at this point. That may change over time but for now serious technical damage has been done. For lower high shorts (if we trade higher first especially) I will be monitoring the formation of a balance phase and I will short against the top of that balance. That may take days. Friday’s high was all the way up at 5058. Anything below there is objectively a potential continuation short on the daily. Back below 5032.75 can be a continuation short on the weekly. While I believe we could see a minor squeeze above 5063-5066.5 (prior Feb balance highs), I would still have my eyes open for a lower high short until >5105 especially. It may get a bit awkward above there, but again, could still be a continuation short from much higher.