A Rare Red Close For SPX (First In A Week). Will It Get Bought? June 6th Plan
Since May 13th, ES had found itself inside a massive range, with support for the most part down at 5850, and resistance up at 5987-6k. I have described this range as being a massive head and shoulders pattern (May 15th left shoulder, May 23rd head, May 30th right shoulder). While this is a big picture structure - meaning its of limited utility to us day traders - it still provides the big playground for price to play inside, and this week, we traversed the entire range from support last Friday, to resistance.
As readers know, I am a Failed Breakdown trader and this comes in handy in large ranges because as we know, institutions accumulate using Failed Breakdowns. They find a major low. They wait on a headline to flush the low. They grab all the liquidity under the low (trap shorts, take stops on longs). The low then recovers, and price squeezes. ES spent late last week doing this over and over in the 5850-5877 range. Last Friday, we saw a monster Failed Breakdown, and institutions took a heavy position: We flushed a major low set at 8am on Friday morning at 5877, sold down to 5850, recovered it, and longs were triggered. As updated here daily, I was in this long all week, for +150 points. I wrote last Friday at 4pm: “My general lean is always to defer to the trend. Bulls control above 5877. 5925 recovery starts us up to 5936, 5945, then 5965-70. Breakout above to 6k+.” We got to 6k yesterday, then spent all day yesterday mostly building out a flag between 5975 support (which held 10x yesterday) and 6k resistance. This range would be the playground today.
Today was an absolute Gold Mine for Failed Breakdown traders and we began the trapping at the 5975 level. I wrote yesterday: “A flush of the whole 5975 shelf is also of interest. This could be a flush down to 5970 or 5956-61, then recovery of 5975 is actionable.” Today we saw exactly this over and over. At 830AM we dipped to 5970, recovered 5975, squeezed to 6014. At 10am, we dipped down to 5956-61, recovered 5975, rallied to 6008. At 10:50AM, we tested 5956-61 again and rallied to 5985. At 2:15PM, we flushed the entire cluster to 5945, trapped shorts again and squeezed to 5975. Now and then, there are days where the price action perfectly matches up with your edge, and today was one of those days.
After 4 tests of this 5956-61 support though, it finally gave out, and ES sold into the close. This was the first day in a little over a week that ES closed with a sell as opposed to at or near the highs. Will it get bought, or are we headed back to 3 week range support? In today’s newsletter I’ll talk this, I’ll do a deep dive into a powerful Failed Breakdown we had on Tuesday morning (beneath the 5925 level) which slingshot us higher and started this weeks strength. Then I’ll discuss the actionable trade plan for tomorrow.