The Bears Finally Did Something. Now What?
IN THIS EDITION
- 01 / Market Context
- 02 / ES Chart
- 03 / Important Levels
- 04 / Trading Higher
- 05 / Trading Lower
- 06 / What Else…
Strength is constructive.
Confirmation is still the job.
We’re now in Monthly Balance
01 / MARKET CONTEXTThe rejection at 7812-7822 finally delivered the higher-timeframe damage we had been watching for. ES ended its monthly one-timeframing higher and moved into a three-month balance. I continue to lean toward a broader correction, but after the liquidation we just saw, I’m less interested in pressing shorts than in seeing whether sellers can defend the next rally. A meaningful backtest higher would be entirely consistent with the structure here.
For nearly three weeks, 7812-7822 was the minimum requirement for bulls to begin regaining control of the higher timeframes. Wednesday’s after-hours rally reached 7819.50 and failed, leaving buyers trapped overhead. The subsequent liquidation carried ES through the weekly downside objective at 7569-7575 before buyers responded.
The more consequential development was Friday’s break of September’s ES low. This is the first prior monthly low taken out since the YTD low was established. That brings the monthly timeframe into balance. October’s value technically overlapped higher, but ES now has a three-month balance overlapping the prior three-month range. 7541-7543 is the major decision point between those ranges. Acceptance below it opens the door to a deeper rotation toward the July and June lows.
Conversely, a reclaim of the June high at 7649 puts ES back into the middle of the current balance, with room for a more substantial rotation higher. That would not automatically repair the damage. Backtests after monthly one-timeframing higher ends are common, and the response can develop into either a lower high ahead of another leg down or a recovery that eventually challenges the balance highs. We need to let acceptance and follow-through distinguish those outcomes.
Important levels to monitor
02 / THE DECISION MAPThese levels organize the plan. The reaction at a level matters more than the number alone.
| Level | What I’m Watching |
|---|---|
| 7812-7822 | CPI low, ER highs, FOMC highs |
| 7738.25 | Value Gap |
| 7670-7725.25 | RTH Bearish Gap |
| 7670-7680 | WK Pivot |
| 7569-7575 | Sept ES Lows |
| 7541-7543 | SPX/SPY Sept Lows |
| 7514-7522 | Downside Pivot |
| 7476-7786 | Weekly VAH, FOMC High, WK Value Gap |
If buyers regain Oct value
03 / TRADING HIGHER SCENARIO7648 is the first major test area. Below it, sellers retain a clearer advantage in the lower portion of the three-month range. More aggressive sellers would defend that area and then take out Friday’s low with continuation. If they cannot, the next important test is 7670-7680, which includes Friday’s high and the lower edge of the bearish RTH gap.
That gap runs from 7670 to 7725. A reclaim of 7670-7680 also puts ES back into October’s value, increasing the pressure on sellers. They need to produce a look above and fail (LAAF) and return price below that area. A rejection higher up is not enough if buyers continue finding acceptance above 7670-7680.
The more significant references within and above the gap are 7703-7712 and 7725-7738. Most of this past week’s volume traded above those areas, so failed reclaims remain a concern. I would be careful treating the first push higher as a durable recovery without acceptance.
Firm acceptance above 7725-7738 puts sellers under meaningful pressure and favors a rotation toward 7763 (last WK POC), then 7769-7772. A lower high can still develop anywhere below this past week’s high, but sellers would be giving up a meaningful advantage by allowing that reclaim to hold. The larger higher-timeframe recovery test remains 7812-7822.
If sellers press below Sept lows.
04 / TRADING LOWER SCENARIO7541-7543 is the first major test below this past week’s low. A probe below Friday’s low that produces a look below and fail (LBAF), followed by a strong close, would warrant attention for a responsive long. It could also set up a transition into a three-day balance, giving us familiar trades once that balance is established. That is a conditional setup to watch, not a prediction that the low must hold.
Acceptance below 7541-7543 keeps continuation shorts in play. The broader 7480-7520 area has been a major higher-timeframe decision zone, and I become increasingly cautious pressing shorts into 7476-7586, 7458-7463, and 7412-7417. These are places to reassess continuation and watch for a response; touching a level alone is not a reason to fade the decline.
If sellers maintain control through those references, the larger objectives are the July lows at 7346 RTH / 7324 ETH, followed by the June lows at 7247 RTH / 7232 ETH. On my non-back-adjusted chart, the 200-day SMA is near 7340, with the YTD VWAP and January-high AVWAP around 7300-7320. Those references add context if the auction reaches that area.
Any bounce from lower needs to reclaim 7541-7543 and this past week’s low, then at minimum 7644-7649, preferably 7670-7677, before I would treat it as evidence of a more meaningful shift in control. Until then, a response from support can remain a rally within a declining auction.
Let structure decide tell the Story
05 / Final ThoughtsThere is also plenty of room for two-way trading within Friday’s range. An inside month developing within a multi-month balance can be particularly choppy, so I’m not interested in forcing a directional weekly thesis onto every move. A lower-first auction may give us a cleaner read: either sellers establish acceptance below 7541-7543, or buyers reject the breakdown and begin reclaiming the references overhead.
The technical damage is real. So is the potential for a meaningful rally after an extended liquidation. My job this week is to stay responsive to that distinction: favor continuation when breakdowns hold, respect failed breakdowns, and make a rally prove itself through acceptance at the key reclaims. I still lean toward a broader correction, but I want the next trade to come from the auction in front of us, not from a need to defend that opinion.