Buy The Dip Is Back For Now, But Can SPX See All Time Highs? Feb 7th Plan
This week started off the same way last week did: With a massive 75 point bearish gap down on Sunday from 6066ish Friday, followed by deep sell to 5940. This then setup a monster squeeze to start the week. Readers know though that when deep sells like that happen there are two groups of market participants who each approach it differently: Retail sees this and - consumed by the headlines and fear - shorts into the hole, often getting in right at or near the lows. Professionals/institutions, take the other side and prepare to either set a trap (institutions) or trade the trap (professionals). Readers know that my core edge is trading Failed Breakdowns, and as I warned explictly Sunday, we would see one right off the Sunday open.
We did: We lost last Mondays 5949 low by 10 or so points, recovered, and longs were triggered. This evolved into a 130+ point, multi-day run. My initial target for this long was to fill the Sunday opening gap, and I wrote Monday 4pm: “If I had to give a lean it is always to defer to the immediate trend. This means as long as ES can flag out above 6004-08 or 6020 ideally, we can push to fully fill the opening gap to 6066.” By Monday’s close, we got to 6066 exact.
After the gap was filled, ES had more work to do on the upside. Remember that macro Failed Breakdowns like we had to start this week typically have legs, I was looking for ES to put in a full back-test of where we broke down last Friday. I wrote yesterday at 4pm: “Its been an incredible run and I am now up 130 points on my runner from Sundays macro Failed Breakdown. My general lean is always to defer to the trend until proven otherwise. Bulls want to hold 6066-70 ideally. This keeps 6099, 6115, then 6125-30 live.” We got 6099+ today so far.
Can ES make the trek to ATHs? In today’s newsletter I’ll talk this, I’ll do a deep dive into quality Failed Breakdowns (all provided to readers in advance) we had on Tuesday and Wednesday below 6020 and 6037 respectively that provided opportunities to add to this long. Finally, I’ll discuss the actionable trade plan for tomorrow.