Dips Keep Getting Bought In SPX, Is It Ready For Next Leg Up? Or Pullback 1st? July 10 Plan
As discussed extensively, last week saw ES do something incredibly rare: Put in 10 green days in a row. This 10 green in a row was a byproduct of classical technical analysis at work. On June 23rd, ES broke out of a two week long bull triangle with support with support at 5970 and resistance at 6081. 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 for the two weeks headed into this week. We rallied for 10 days exactly following June 23rd. The traditional “measured move” target for a rally of this size was roughly 6325, and I wrote last Monday June 30th (when we were 6250) that: “My general lean is always to defer to the trend until it ends. This sets up 6271, 6280, then ATHs to 6315, 6320-25.” By Thursday, we hit 6333 which was the high and this completed the triangle.
We have since then spent this week “digesting” this rally. As I warned on Friday at 4pm: “We should not be surprised *At all* to see more complex corrective (pullback) or consolidative action as the market digests and resets after this leg up.” Monday, ES put in its first red day after 10 days, and yesterday, ES spent consolidating in a tight range. After a large rally, price needs to digest it and this can be done either “in time” which means a sideways base, or “in price” which means a pullback. ES opted for the latter yesterday and we spent the whole session tightly consolidating mostly between 6271 and 6281. Its why I entitled yesterdays newsletter After 10 Green Days In A Row, SPX Is Coiled Tight. Move Incoming, What Way? July 9 Plan
This largely continued into today. I wrote yesterday at 4pm: “We are coiled tight and ES is waiting on headlines. My general lean is always to defer to the trend. 6250-6288 is now an extreme chop zone in ES. In the most extreme bull case, ES will hold 6271 (or trap below), then head to 6281, 6288. Above there, we run to 6303-05, then 6320+.”
Last evening, we saw exactly this. We flushed 6271, trapped, recovered, then hit 6288 exact by 830AM this morning, then 6315 by 10am, from which point we dipped. ES is still working off the recent rally. Is it really ready for new highs though, or is there more chop/pullback needed?
In today’s newsletter I’ll talk this, I’ll do a very deep dive into my trailing stop metholodogy/runner system. As readers know, I was in one of the longest runners in recent memory, which lasted from June 22nd, until stop out on this Monday July 7th. This was updated transparently at the close each day. I’ll go over in detail this entire trade and how my simple trailing stop system allowed it to survive. I’ll also discuss some quality Failed Breakdowns we’ve had this week, before talking my actionable trade plan for tomorrow.