CPI Day Tomorrow: Volatility Incoming For SPX. May 15 Plan
As discussed extensively, on Friday May 10th something very important happened in ES: It broke out of a major, month long bull flag pattern. What happened afterwards? I wrote on May 9th: “5155: Resistance of the major red downtrend channel/flag shown in the below chart. Leg to revisit the highs begins above here” and we put in 9 green days in a row including today. Markets do not need to be made more complex than this, and improving performance is not a matter of adding complexity, but rather stripping away complexity and the layers of noise and macro opinions to reveal what price is really saying.
After a 100+ point move up, ES has spent the last couple days resting, and building a base for the next leg up. I wrote yesterday: “As long as 5235 keeps holding (or any failed breakdowns below quickly recover), we can fill out the 5235-5262 range more. This would then setup a breakout perhaps after CPI on Wednesday, to 5272, 5290, then 5302”. We saw this exactly today, and we started the day by flushing 5235 to put in a failed breakdown/trigger longs, recovering, then rallying to ~5262 range resistance, before breaking out to 5272+ target where we hit exact before the close.
Tomorrow, however, is CPI day, and these are notoriously the most volatile, difficult days of the year. Last CPI day, we sold off 115 points in seconds. In today’s newsletter, I’ll talk my approach for trading CPI days, I’ll go over an interesting variant of my core setup (the failed breakdown), then I’ll discuss the actionable trade plan for tomorrow.