Is "Buy The Dip"Taking A Break In SPX? Feb 25 Plan
As discussed at length, since the start of the month ES has been in a buy dips mode. We have seen several dips in the 80-150 point range but they all got bought with little drama and without ES putting in more than two red days. Buy dips Mode in ES generally begins when it puts in my core setup: The Failed Breakdown, which is the footprint of institutional accumulation. Then, bulls control until ES loses a significant, well-defended support shelf, which gives bears a chance (key word) to sell for an actionable short and a chance to break the buy dips cycle.
Most recently, back on Sunday February 9th - over two weeks ago now - ES put in a macro Failed Breakdown of 6020, and this got us long with a runner that lasted nearly two weeks and over 100 points. I wrote back on Friday February 7th at 4pm: “For Monday, bulls will want to hold 6016-20. This would allow ES to work back up to range resistance, starting with 6066-70 which is the 1st gateway, then 6093, then onto 6129.” We saw this right after the open on Sunday February 9th (held 6016-20) and by Friday February 14th, we had tagged 6129 and we spent all last week building a large base. Generally, the support of this base was 6123-6116 and we tested this over and over all last week. This was therefore a significant, well-defended support shelf and we know what that means: If it fails, we sell.
I wrote last Thursday at 4pm: “If 6123-6116 fails, 6098 is the absolute lowest bulls want to see, below which, we can collapse.” We lost it, and collapse we did, causing ES to put in the 1st true open-to-close trend day to the downside of 2025. The question for today would be if the dip would get bought.
My lean was yes. I wrote on Friday at 4pm: “Given we sold all day without any bounce, my general lean for Monday ES can try a relief pop. This would require 6038-42 to recover, and bulls can try up the levels to 6068-72, 6098, then 6104.” Right after the open last night, we recovered 6038-42, and rallied to 6068-72.
From there, we flushed shortly after todays open and it should come as no shock what happened next. The dip was bought again, as usual. I wrote Friday at 4pm: “Below 6014-20 we head for another hard elevator down leg and there is nothing of interest for me until 5993.” We lost 6020 after the open, sold to 5994 low of day, rallied 45 points back to 6038-42, then returned there into the close.
Bulls attempted dip buys today and while they produced actionable bounces, they were sold. Is buy the dip taking a breather? In todays newsletter I’ll talk this, I’ll do a deep dive into the full sequence of events on Thursday/Friday that resulted in Friday’s collapse, in particular, how it relates to my three setup types (Break-down Short, then Back-Test Short). I’ll also discuss the cause of today’s squeeze. Finally, I’ll discuss the actionable trade plan for tomorrow.