Are New All Time Highs Coming For SPX? Jan 31st Plan
This week started off with a mini “Black Swan” event seeing ES sell 213 points from last weeks high to this weeks low. I call these types of moves “elevator down” sells and they are somewhat rare. This refers to ES selling vertically for a very short period of time - often a few hours, but rarely a whole session and typically for 50-200 points. During this window, all supports are ignored.
Readers know however that I am less interested in these sells than in what always happens immediately after them. Be it a bull market, or a bear market; after an Elevator Down sell, ES loves to short squeeze. Short squeezes are caused by my core setup: The Failed Breakdown, and this week has been a masterclass for them. On Monday morning right off the open, ES saw a macro Failed Breakdown - flushing last weeks ~5997 low to down to 5940s and recovering - triggering us long for the week and as readers know, I’ve been long since.
I then wrote 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 6082, then 6115-20 to fill the gap.” Before FOMC yesterday, we got to 6109, a little shy of filling the Sunday opening gap at 6115-20.
Today, we then ran again. FOMC yesterday gave us another Failed Breakdown right afterwards at 2pm, to try again. I wrote yesterday at 4pm: “We are in a messy range 6086 to 6043 now. My general lean is always to defer to the trend. As long as we can continue holding 6043, we can ping pong this range more then head higher. Next leg up targets 6105, then the 6120 gap fill.” Today, we worked up those targets and hit 6105 this morning and again this afternoon.
ES is coiled very tight now. Can it make a run for new ATHs from here? In today’s newsletter I’ll talk this, I’ll do a very deep dive into what has been a very unusual few days due to FOMC: We saw all three of my setup types in the last two days and in particular, multiple quality Failed Breakdowns which ultimately triggered todays upside. It is important to know these. Finally, I’ll discuss the actionable trade plan for tomorrow.