Can SPX Push To A New High Now? June 4th Plan
For three weeks now, ES has been inside a massive range, and almost every single day has been a near-carbon copy of the prior: At some point in the session, ES puts in a deep flush (often into the 5890-5870 zone, taking out the prior days low.) That flush then gets bought, and we rally. We saw this last Wednesday, last Thursday, last Friday. I wrote on Friday at 4pm to look for it again yesterday, stating: “Below 5893 is 5877 and this has been critical all day today. I’d be watching the reaction there and if we can flush it down to 5870 and recover, this would be ideal.” and “Bulls control above 5877. 5925 recovery starts us up to 5936, 5945, then 5965-70.” Yesterday we flushed 5877 down to 5870, trapped shorts, and were off to the races, getting to 5965-70 today.
All this action had the effect of painting on the chart a massive bullish inverse head and shoulders pattern, something I confirmed at the close yesterday, stating: “We remain in a large range (5850/61 to 5965-70 with 5925 magnet in the middle) and this range is large inverse head and shoulders pattern. 5965-70 is next target up, reaction there, then if ES can break it we see 6k, 6036, 6047, then 6072.” Today, we filled that range out.
This recent bullish action was not surprising however. As I’ve said every single day since April 6th, ES remains in a buy dips regime. This is the macro trend. We get dips, some large, some small, some fast, some slow, some long, some short, but they get bought. Even for day traders, knowing the regime is critical and this consolidation for three weeks occurred in the context of this regime. For Failed Breakdown traders like myself, this action is ideal. Remember that institutions accumulate via Failed Breakdowns: They flush a low, trap shorts, then enter, and price squeezes. We’ve seen it daily for weeks. You can get either trapped shorting over and over, or you can trade alongside the institutions.
Despite the rally today though, ES is still stuck under last weeks 6k high. Can it clear? In today’s newsletter I’ll talk this, I’ll do a deep dive into some of the quality Failed Breakdowns we had on Friday that set the foundation for the Friday/Monday/Today’s rally (I’ll discuss the distinction between shallow and deep Failed Breakdowns). Finally, I’ll discuss the actionable trade plan for tomorrow.