A Historic Gap Down For SPX/ES Was Bought. Are The Lows In? Feb 4th Plan

This weeks open into today was “Deja Vu” from last weeks open into Monday and many traders likely felt caught in a time warp. Readers recall that last Sunday ES gapped down around 20 points from 6120s, then sold 120 points due to headlines over the DeepSeek AI. ES then rallied all week. This week the exact same script played out a second time. This time, it was due to global trade war headlines putting in the largest gap down open (75 points) in over a decade.

While we can’t control headlines, the technicals tell us how to react and trade them. Readers recall that after last Sunday’s gap down and crash to 5940s, ES put in my core setup: A Failed Breakdown of the prior weeks ~5997 low. After this I was looking for a rally and gap fill all last week, writing last Monday at 4pm: “For now though, the bull case is that we got a short squeeze trigger on the Failed Breakdown of 5997 this morning at 8am, which triggered longs. The bull case ES can now begin back-testing with 6068-71 1st up. React there, then onto 6115-20 to fill the gap.” By last Friday, we filled the gap and rallied to 6140s for a spectacular run.

Then around noon on Friday, ES did something it had not done in several days: Driven by more trade war headlines, it lost a major support. I tweeted at 12:16PM Friday that 6127 was support, and its failure would trigger short. We lost it, and down we went which progressed in this weeks monster gap down open.

What happened last night/today? The exact same thing as last week. As tweeted in real-time last, ES put in a Failed Breakdown of last weeks low right after the open last night, then squeezed to fill the gap 6050ish this morning

Now the question is, can it sustain? In today’s newsletter I’ll talk this, I’ll do a deep dive into the setup last Thursday that caused the final squeeze to ATHS (my core setup, the Failed Breakdown), then the setup Friday that caused the melt-down below 6127 (my third setup, the Breakdown Short). Finally, I’ll discuss the actionable trade plan for tomorrow.