CPI Tomorrow. Will It Endanger The Rally? June 11th Plan
For about a month now, only one pattern has mattered in ES. As I’ve said daily, since May 13th ES had built a massive, bullish inverse head and shoulders pattern: May 15th left shoulder, May 23rd head, May 30th right shoulder). The neckline was located at about 6k, which we tested 7x since May 19th (including 2 traps above last week). This large structure was embedded within a massive uptrend we’ve been in since April 6th. Everyday since April 6th, I’ve called this the buy dips regime. Even though I’m a day trader, its vital to know and respect the broad trend. I have not done a single short since April 6th & while we’ve had a variety of dips, they all get bought.
Back on Friday May 30th (when we were sub 5900 after a big dip to 5850), I wrote that I was looking for ES to buy that dip, fill out this structure, and run to the 6k inverse H&S neckline. I closed out my Friday May 30th newsletter by stating: “My general lean is always to defer to the trend. 5925 recovery starts us up to 5936, 5945, then 5965-70. Breakout above to 6k+.” By last Wednesday, we had hit 6k. ES then spent Wednesday and Thursday trying unsuccessfully to break 6k with a large failure last Thursday that took us down to 5929.
On Friday though, ES finally popped above this 6k resistance, and yesterday, we back-tested and held the structure. I wrote on Friday at 4pm: “My general lean is always to defer to the trend. ES is attempting to breakout a 3 week range (inverse head and shoulders pattern) from 5850 to 6k. Bulls want to hold 5975 lowest Monday (but ideally, that won’t even test and rather ES will just consolidate around 6k). The next leg up targets 6029, 6047-50, then 6072.” Yesterday morning, we held 6k exact, ran to ~6029 high of day, then sold.
While ES defended 6k yesterday, it was a slow day. The task for bulls today would be to continue defending 6k, with any traps below getting bought. As readers know, these traps are how I pay my bills as a Failed Breakdown trader. I wrote yesterday at 4pm: “My lean is we flag out above 6k (with 6k flushes below being traps), then we fill out to 6020. Above there, we see 6029, 6038, then 6055+. If 5975 fails, bears may start to get some momentum.” This played out nicely, and by 9pm last night, ES tagged 6029, then 6038. Then overnight, we trapped below 6k twice, trapping those bears again, and we squeezed into the afternoon to 6050+ later today.
CPI is tomorrow. Will it spoil the rally, or just squeeze it more? In today’s newsletter I’ll talk this, I’ll do a deep dive into a very interesting variation of my core setup: The Failed Breakdown, that we had on Friday morning at 8:30AM when we recovered a major resistance shelf at 5975, and this caused the monster leg up we’ve seen since. This was a great example of a deep Failed Breakdown, and provided a very clear example of a core concept I call “Acceptance” and acceptance is the tool we use to judge when a level has truly recovered as opposed to a fakeout. Finally, I’ll talk the actionable trade plan for tomorrow.