Price closed Friday after a brutal short seller squeeze.
After rallying from 5729 — a reclaim I didn’t take but noted (explained below) — ES ripped as high as 5977.50. But, the last hour of the session told the real story.
We rolled hard into the close, finishing at 5948.50.
We saw this coming.
All week, the signs were stacking up: momentum fading, structure stalling, sentiment getting frothy. We didn’t force trades into that. We documented it, respected it, and stayed patient.
I noted this likely selloff in every letter last week. My aggressiveness was tamed indicated by my risk tolerance and position sizing.
Profit protection is the name of the game in trading and being aware of what possible around the corner.
Here’s a few things I said last week:
Monday– May 12
“Readers know this is the worst time to be trading and this type of scenario typically leads to a sit. We will turn, where, I’m not sure at these elevated levels. There’s no need to put more potential turning points”
Tuesday – May 13
We’ve longed this market many times in the past month, and we’ve caught several hundred points of this rally.
Now everyone else is waking up.
That makes me pause. "Chasers are active. If it’s a headfake? We’ve got levels, stops, and clarity.
"We’re pushing right into a shelf that’s got memory. No fresh liquidity until much further below. We will turn. Maybe today
Wednesday – May 14
"The best move was no move." "In the last 20 minutes of trading we gave back 24 points."
At these levels, there are very few close to price opportunities. Above this area we have some resistance to get through and it could give us the liquidity seek we need before adding to our runners.
Thursday – May 15
"Divergence was the first warning." "We failed to print a new high… 5927 never broke."
That’s usually our cue to hold what’s working and get pickier with new risk.
We failed to print a new high yesterday — not even intraday. 5927 never broke, and by the final hours of the session, signs of a liquidation event began creeping in.
We called out exhaustion and didn’t bite on the failed high.
The chart was vertical. The crowd and newswires were euphoric.
But we had divergence on multiple time frames: The 1 Hr and 15 min chart
I lost count the number of things I saw on Twitter and Substack referencing; “to the moon.”
….And that’s when discipline matters most.
Friday – May 16
"It wouldn't take much for this thing to unwind back to 5880s and even 5840s if key demand breaks." "Structure still favors bulls — but that structure is now fragile."
That was the map. And this morning, ES is printing right near 5900.
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Friday May 16 Trade Review - 0 Trades
We didn’t trade Friday — and I’m glad we didn’t.
There was one trade potential we didn’t take, the 5927 reclaim.
I received DM’s about this trade so I want to address my thought process here.
Here’s what I wrote in the May 16 AM newsletter:
You can see here on the chart what I meant by this:
After our 5912 reclaim long, Thursday, price paused at 5927 which was Wednesday May 14th and Tuesday May 13th high critical. We broke out after the reclaim and tested that breakout point multiple times by the time Friday 10:30 AM opp presented itself.
When you get this many warning signs — divergence, failed highs, sentiment hitting extremes — and the market still squeezes, that’s your cue to stop pressing. I felt like I’d be pressing by taking 5927 on it’s 4th attempt.
If you took it, great. The trade worked well. You can see above you would’ve hit T1 and T2 and caught a nice 50 point rally into 3PM.
Hopefully this makes sense as to why I chose not to take it.
That kind of move isn’t strength. It’s fuel. Shorts covering. Weak hands chasing. Price overshooting.
If you try to force a short into that, you get run over. If you chase the top, you’re late.
The best thing you can do is sit.
That’s exactly what we did Friday. We didn’t jump in. We didn’t guess.
We waited. And by the close, the tape confirmed the decision.
Let’s talk about the setup I’m watching right now as we’re starting to unwind…
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