Biggest Sell For SPX Since November 15th. Will It Get Bought? Dec 10 Plan
As discussed in last weeks newsletter, ES has been in the midst of a relatively historic run, which has best been quantified by the fact that every single day since *November 18th*, ES has set a higher high. That is to say, it cleared its prior days high, putting in 13 days in a row of this from November 18th until Friday. This is a parabolic rally and every micro dip within this run has been bought. Today, ES did not make a higher high.
As I also discussed at length over the last two weeks, this rally was not some random coincidence, nor was it unexpected. Readers were positioned for the fact that for two weeks from Nov 11th to Nov 22nd, ES had built out a massive, textbook bull flag. It broke out November 25th. In classical technical analysis we know that breakout strength and duration is proportionate to the structure that produced the breakout. What does a two week bull flag breakout therefore produce? A two week, parabolic rally, and its what we go. Of course though, since the main breakout ES has taken small breathers to form smaller structures. Last Monday and Tuesday, we built a smaller bull flag which is why I wrote last Tuesday at 4pm (when we were 6060s): “ES is flagging again 6066 to 6035-38. As long as this structure is in tact, we are en route to 6074 target #1, 6082 target #2, then 6102-6106 target #3.”
We hit 6106 Wednesday, and since then have been building out a new pattern: A 3 day “megaphone” pattern, and I wrote Friday at 4pm: “After a big rally this week we are now consolidating in a large megaphone pattern with support 6064-68, resistance 6117, and a 6081 mid-pivot. We could ping pong this for a while”. Today, we sold down to 6064-68 megaphone support exact where bounced then spent all day.
This was a rare red day for ES and while small in absolute terms, was the largest since November 15th. Will it get bought like the others? In today’s newsletter I’ll talk this, I’ll do a deep dive into a great example of my core setup that we had on Friday (a Failed Breakdown) which ultimately caused the strength we saw Friday into today. Its essential to see as many Failed Breakdowns as possible to internalize them. Finally, I’ll discuss the actionable trade plan for tomorrow.