CPI Tomorrow, Will It Ruin Or Accelerate The SPX Rally? July 15 Plan
Last three weeks saw demonstrated an excellent example of what I call the market cycle. I frequently talk about how ES generally only does two things. 1) It consolidates. I call this “Mode 2”. Mode is what price spendings 90% of the time. Typically, price will form a classical chart pattern in the process. 2) It trends. Price only trends about 10% of the time, meaning its rare. The market cycles between these two things indefinitely. It will consolidate, form a pattern, trend, consolidate, form a pattern, trend.
Case in point: From June 23rd to July 4th, ES trended up and we put in 10 green days in a row. Why? Because for two weeks before June 23rd, ES built a huge triangle 5978 to 6081 or so. I provided this setup way back on Friday June 20th at 4pm when we were 6020, by stating: “My general lean is always to defer to the trend, until it ends. 5978-82 to 6081= a range (descending triangle). My lean is we work back up to 6050, then 6081. Above there, we can try breakout.” As a general rule in technical analysis, two week structures lead to two week rallies and this is precisely what we saw from June 23rd to July 4th. The traditional “measured move” target for a rally of this size was roughly 6325 as readers knew, and by July 4th, we hit 6333 which was the high and this completed the triangle.
After this? Market cycle dictates its consolidation time and ES spent the entirety of last week back in consolidation. This pattern is/was anoher triangle. With its support trendline (connecting the July 2nd and July 7th higher lows) at 6263 and its resistance a rough zone at 6298/6311 . I wrote on Friday at 4pm: “We remain in very complex rangebound chop all week. The range is a sloppy triangle now with support down at 6263, resistance at 6298 (with a clear resistance shelf just above there at 6311). We could fill this out in a million different ways. As long as its structurally in tact though, my lean is always to defer to the trend. Next leg up sees 6319 1st, 6333 2nd, then 6338, 6349, 6361” This couldn’t of acted more precise and right off the 6pm open last night, ES gapped down. Where did we gap down to? 6263 *to the tick*. We then filled the triangle out to the upside this morning to 6311 target.
We have a triangle, and we have CPI tomorrow. Are we ready to move? In today’s newsletter I’ll talk this, I’ll do a deep dive into a quality Failed Breakdowns we had on on Thursday/Friday. I am a Failed Breakdown trader, and we typically get at least one per day. I provide the setups in advance, then each day after do “post-mortem” on the setup so readers can internalize better how to trade them. Finally, I’ll discuss the actionable trade plan for CPI tomorrow