Every "War" Dip Is Bought In SPX, But Can It Finally Break The 2 Week Range? June 24 Plan

For the past 2 full weeks into this week, ES had been stuck inside a massive range. This range was largely 5978-82 support (we set big lows here on June 5th, June 12ths, and June 19th) with 6081/6099 resistance, and 6050 being a large “magnet” inside the range. I described this pattern as being a large descending triangle pattern. Inside this range, the wild ping pongs we saw were largely driven by a backdrop of conflict in the Middle East, where escalation headlines sell us to range support, and then institutions buy the dips there. On an even more macro basis, ES had been since April 6th in a large uptrend or what I’ve called the buy dips regime. Every dip is bought, and we’ve bought them.

While we can’t predict what headline will come out of the Middle East, we can react after those headlines - using technicals - to place trades. Specifically, as I’ve discussed at length, my core setup is the Failed Breakdown and Failed Breakdowns are how institutions accumulate. Typically institutions wait for a bearish headline, lows flush, then institutions grab the stops/liquidity, and price reverses. Technicals on the other hand, can tell us where this is likely to occur. It was this, that guided our trading for the last two weeks, and the same trades paid out over and over again.

Way back on June 12th for example, we saw the mother of all dips where ES sold 125 points on the initial war outbreak. In doing so, it traversed the entire range discussed above from resistance at 6099, down to support at 5979-82. This in turn, setup a monster Failed Breakdown. I wrote a little prior to June 12th “I especially like the Failed Breakdown of Thursday June 5th 5981 low especially if we tag 5978 first.” What did we see Thursday June 12th? Exactly this. We tagged 5978, recovered the Thursday June 5th 5981 low, and longs triggered. This long produced a monster leg right up the range. Last Monday, we hit 6099 range resistance. What came next? We sold down the range last week back to 5978-82 again last Thursday, Failed Breakdown yet again (second time), then 100 point rally into Friday.

That took us into the weekend, where the market would be at the mercy of headline flow yet again. I warned on Friday at 4pm: “As a word of warning, geopolitical tensions remain high. This means we could likely see a Sunday gap, and the direction of the gap depends entirely on weekend headline flow (escalation = huge gap down, peace = massive gap up and vertical squeeze). Technicals can’t help us at all until the market reopens and headlines alone govern the Sunday open.” Gap it was, and we saw a gap down. From there, it was time to wait for the Failed Breakdown.

I tweeted on Friday at 4pm: “…Wait for a Failed Breakdown of Thursdays 5970 low. Perhaps down to 5964 and back up.” Right at 6pm, we flushed last Thursdays 5970 low, trapped shorts, longs were triggered the exact same setup for a third time in a row, and we were off this morning. I wrote on Friday at 4pm my lean was “we work back up to 6050, then 6081. Above there, we can try breakout to 6099, 6124, 6143.” We hit 6081, which was the exact high of day today.

The triangle is filled out. Is a breakout coming? In today’s newsletter I’ll talk this, I’ll do a deep dive into some of the Failed Breakdowns we saw last week including the one that most recently got me long on Thursday morning in the low 5980s (we saw 1-3 per day, everything you need to know about this setup can be found last week). Finally, I’ll discuss the actionable trade plan for Tuesday.