10/26 Trading Plan - Wednesday Recap and Day Ahead

Recap

The past week has seen the ES experience an unusual streak of red days, with six out of the last seven days ending in the red. This rare occurrence was followed by a green day on Tuesday as part of a broader relief rally at the Sunday futures open. However, the bulls could not sustain this momentum, and we saw a return to the red. The ES has been base building between 4245 and 4275 but lost this support on Wednesday, triggering a bearish start to the session. The RSI is oversold again, suggesting a potential short squeeze may be on the horizon.

The Markets Overnight

🌏 Asia: Mostly down a lot, China up slightly
🌍 Europe: Down
🌎 US Index Futures: Mostly down but rallying off earlier lows
🛢 Crude Oil: Down a lot
💵 Dollar: Up slightly
🧐 Yields: Down
🔮 Crypto: Mostly up

Major Global Catalysts

• ECB holds rates steady for the first time in 10 meetings.

• The US House has a new speaker who’s expected to support a stop-gap spending bill to avoid a government shutdown in November.

Snapshot

Daily

4-Hour

Key Structures

The 4335-40 zone remains a major pivot, connecting the September 2022, Feb 2023, and June 2023 highs. The 4247-50 zone has been key support over the last few days, but this collapsed on Wednesday. The 4205 area was an important support in May and has been held so far this week.

Support Levels

4214, 4205 (major), 4186-90 (major), 4173, 4163, 4154 (major), 4143, 4127 (major), 4112, 4108, 4101, 4093 (major).

Resistance Levels

4221 (major), 4233, 4247-50 (major), 4258 (major), 4271, 4279 (major), 4290, 4297-4302 (major), 4310, 4322 (major), 4328, 4335-40 (major), 4349, 4355-59 (major)

Trading Plan

The bear case remains dominant until proven otherwise. The best shorts are on backtests, but for those looking at breakdown trades, the failure of 4205 and 4185-90 is key. For the bull case, a reclaim of 4220 is needed to start, then a reclaim of 4247-50. A reclaim of 4220 would open a retest of 4247-50, and from there, it's likely we could see at least a few green days back to 4300.

Wrap Up

While bears remain in control, there is a risk of a short squeeze, which is often sudden and violent. The general lean is that 4185-90 can hold, then try the reclaim of 4220 to push back to 4247-50, dip there, then try higher. If 4185-90 fails, we sell to 4163-53. The key is to remain reactive, trading level to level, and leaving any bullish or bearish big-picture outlook at the door before the trading day starts.

Disclosure: This is not financial advice and is for informational purposes only. Please consult a professional financial advisor before making any investment decision.