Inside Week For SPX; Do We Break It Out Next Week? February 13th Plan
Note: This is a re-send of the newsletter for Monday February 13th, for those who did not receive. The original was sent out on Friday evening.
On Thursday, my downside sell target was 4090-85, and I concluded yesterdays newsletter by writing the reaction at this zone would be very telling for what the next week looks like. The market certainly agreed with the importance of this level, and we spent nearly the entire day chopping in that zone before a late day pop.
Its no coincidence. Technical analysis 101: It was this resistance area we lifted off from after FOMC last Wednesday, rallying 200+ points. What happens to resistances that break out with force? They turn into supports. Not only this, but ~4085 is also support of the core 1+ week bull flag structure (shown in yellow below) that I have discussed daily and has driven my trading all week. Today, it held.
A few things are clear: We spent this week consolidating inside a perfect bull flag structure, and this consolidation is verified on the weekly chart, with ES putting in an inside week. Inside weeks lead to breakouts, and a big move is incoming; CPI Tuesday likely drives it. In today’s newsletter, I’ll be talking my approach to trading choppy days like today, talking the big picture setup here (and where the bull case ends), then discussing the actionable trade plan for Monday.