How Much Gas Does SPX Have Left In The Tank? June 27 Plan
Its been an incredible run in ES and we are now +230 points from Sunday’s long. On Monday evening this week, something important happened in ES and it caused this: It broke out of its two week range. For the past two weeks, ES had been building a large bullish descending triangle with 5978-82 support, and 6081 resistance. I specified this back on Friday 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) with 6050 a key magnet inside. My lean is we work back up to 6050, then 6081. Above there, we can try breakout to 6099, 6124, 6143.” By Tuesday, we got to 6143, and we spent yesterday basing out there.
How did I know we were headed higher? For the last two weeks, we had witnessed tell-tale signs of institutional accumulation. Remember institutions leave footprints on the chart when they buy. That footprint is my core setup: The Failed Breakdown. The typical institutional accumulation process follows similar steps: Bearish headline hits, price flushes to a major support shelf where lows are clustered. Price then loses the low, and institutions then grab all the liquidity underneath the low (shorts rushing in, stops). Price then springs above the low and a squeeze starts. I hunt this pattern everyday.
Right off the open Sunday, we had a massive institutional accumulation event, and it got us long for the week for what turned into a 180+ point long. News the US attacked Iran over the weekend flushed ES below 5978 triangle support. I wrote on Friday at 4pm: “…Wait for a Failed Breakdown of Thursdays 5970 low. Perhaps down to 5964 and back up.” We got this, and the rest was history.
The task for bulls today was to defend this big breakout and head higher. My lean was (obviously) they would. I wrote yesterday: “My general lean is always to defer to the trend. ES broke out a two week triangle on Monday 5979-82 to 6081. Today, we consolidated after this breakout mostly 6140-6155. Bulls want to hold 6140 (with any traps below being bought) which sets up the next leg up to 6162, 6172, then 6208.” We got to 6200 high of day.
How much gas does ES have left in the tank? In today’s newsletter I’ll talk this, I’ll do a very deep dive into that Sunday 6pm Failed Breakdown, because it produced a 180+ point move. Readers were prepared in advance for it, but next time we get hit with bearish headlines, its important to understand the trap dynamic that produces squeezes like we saw this week. Finally, I’ll discuss the actionable trade plan for tomorrow.