For The 1st Time Since May, SPX Has Made A New ATH. Trap, or More Ahead? Sept 20 Plan
Yesterday was FOMC day and readers were well aware, FOMC days have 1 core trait, they trap and its why I wrote in my pre-FOMC newsletter: “Rule 2: Expect traps….Wait for a level to flush, run stops, and reclaim before entering”. Right at the close yesterday, we got the mother of all traps with a flush into the close below the 5680 level and below the Tuesday lows, then violent short squeeze into new ATHs today, and as readers know, my primary edge is trading these traps. Remember that traps are how institutions enter trades, they need to hunt liquidity to absorb their orders. You can either be the liquidity, or you can trade after the traps alongide the institutions.
That is exactly what we did at the close yesterday. In my newsletter at 4pm yesterday, I wrote the following: “As long as 5680-85 keeps holding we can simply continue building out the base we have spent the last several days in. As long as this range is in tact though, it targets AThs directly. This could look something like pop to 5724, dip, return to 5736, perhaps final dip, then breakout. 5775, then ultimately new ATHs to 5797+ are in play above.”. We saw exactly this and we held 5680 late day yesterday, then by this afternoon, we tagged 5797. I also wrote in yesterdays 415pm newsletter: “I decided to try the long at 5685ish, risking only part of today’s profits”. This was due to the 4pm failed breakdown yesterday discussed above, and this evolved into a staggering 110 point long.
This current rally came on top of what was already an impressive leg up, with ES 7 green days a row into yesterday (which was a red day), and this entire leg up started on yet another (you get the drift now) massive trap after CPI last Wednesday where we flushed the last Tuesday lows then rallied 300 points into today. How much farther can this go? In today’s newsletter I’ll talk this, I’ll do a deep dive into two concepts that are important to system: The idea of determining control (it was the ongoing control of bulls that kept this rally going) and the trap/Failed Breakdown (which was the practical trigger for the overnight leg up). Finally, I’ll discuss the actionable trade plan for tomorrow.