How Much Do SPX Bulls Have Left In The Tank? May 2nd Plan

Its been an incredible run, with ES putting in 7 green days in a row yesterday and likely 8 today. ES likes to settle into certain modes or regimes where it generally has similar behaviour day in and day out for weeks. Every single day since April 6th (usually in this very introduction), I’ve made it clear here what the mode is: Buy dips, and there should have been no confusion about it.

I have kept a running total of these dips everyday since as they have varied in speed, depth, and duration, but all were promptly bought up, often in the same session: We had 430 point sell on April 9th, 375 point sell on April 10th, 130 point sell on April 11th, 233 point sell April 16th, and 56 point sell April 17th, last Monday a 177 point sell, last Wednesday a 141 point sell, last Friday a 67 point sell, Monday we had had a 88 point sell, Monday we had a 51 point sell, and yesterday we had a 130 point sell. All were bought.

This happens to dovetail very nicely with my edge, and as readers know, I am a Failed Breakdown trader and essentially all rallies/short squeezes are caused by Failed Breakdowns. In order to rally hard, someone has to get trapped and end up as liquidity for institutions accumulating. This trapping occurs when ES flushes a major low, traps shorts, run stops, then recovers. My job is to long - at the same as institutions - on the recoveries. When ES is in buy dips mode, this typically means almost everyday or every second day will see a selloff, bear trap/Failed Breakdown, then squeeze.

This was true yesterday. I wrote Tuesday at 4pm: “Failed Breakdowns of 5493 [Mondays low] would be of interest.” What did we do yesterday morning? We lost 5493, ran to 5457, trapped shorts, and recovered to trigger long. I wrote in that same newsletter that “Next leg up targets 5600, 5620-23, 5650, then 5672 which remains the macro target (back-test of the red megaphone structure in the below chart that we trapped above and lost on April 2nd).” We saw precisely this, and this morning, we tagged that 5672 level, for an incredible 190 point rally from yesterdays 5493 long trigger.

How much do bulls have left in the tank? In today’s newsletter I’ll talk this, I’ll do a deep dive into the Failed Breakdown we had on Tuesday (which produced a 75 point leg up), as well as yesterdays Failed Breakdown, which produced a 130+ point long. Finally, I’ll discuss the actionable trade plan for tomorrow.