CPI Tomorrow. Will This Dip Get Bought In SPX? Dec 11 Plan
Yesterday was somewhat notable because it saw ES - at least temporarily - snap out of the slumber of ultra-low volatility it had been in for two weeks. As discussed at length, for an incredible 13 days in a row - everyday since November 18th - ES managed to clear its prior days high to make a higher high. Correspondingly, every micro dip was bought during this period. Yesterday, ES both did not make a higher high for the first time since November 18th, but it also put in its largest red day in absolute terms since November 15th.
It was no surprise where this red day took us: To the 6064 level. Readers know I had been talking about this level for many days, as this was the zone we broke out on December 6th *and* support of a multi-day “megaphone pattern”. I wrote on Friday at 4pm (when we were 6095): “After a big rally this week we are now consolidating in a large megaphone pattern with support 6064, resistance 6117, and a 6081 mid-pivot. We could ping pong this for a while.” By 11am yesterday, we had arrived there, bounced, then spent all day yesterday into today chopping 6060-63.
Then finally, after 5 tests today of that support zone at 6060-63, we lost it, triggering short at 2pm. I wrote yesterday: “Bear case tomorrow: There are few options for breakdown shorts. First is on the failure of this 6063 zone…. For the 6063 fail, if we can put in another bounce into the evening session off the current 6060 low, the failure there may provide an immediate trigger.” After bouncing at 6060 all day, we lost the structure, and sold off to 6040.
Will this dip get bought like all the others? CPI tomorrow morning may decide. In today’s newsletter I’ll talk this, I’ll then talk a little about how my three setup types work in a broader context. Specifically, yesterday and Friday we saw all three of my setup types: A Failed Breakdown on Friday, a Regular Breakdown Short Yesterday, and a Back-Test Long, within the context of a multi-day megaphone. This is a great opportunity for education. Finally, I’ll discuss the actionable trade plan for tomorrow.