Is SPX Gunning For All Time Highs? May 14 Plan
Today was CPI day, and gave further fuel for what has been a now parabolic rally. From my perspective - as readers know - I’ve been long since 5605-07 last Wednesday, when ES put in my core setup: The Failed Breakdown. We flushed last Tuesday’s 5605-08 low last Wednesday after FOMC, recovered it, and were off. I verified my positioning again at the close on Friday, stating: “I am still holding my 10% long runner from the 5684 Failed Breakdown last evening but this is ultimately still going from the FOMC day failed breakdown of 5605-08 discussed above as well. Given my low cost basis on this, I have no issue holding over the weekend.” This long ultimately paid out 320+ points.
Heading into today, I verified I was still holding this long again at the close yesterday, stating: “Its been an incredible session and days like today are exactly why I hold runners. I am still holding my 10% long runner from last Wednesday at 5605-08, with my most recent add being the 5815 Failed Breakdown Re-Test discussed above and will continue letting this work.”
This Failed Breakdown last Wednesday was the final fuse for the breakout of a bull flag pattern that we had built out for the week prior mostly 5585 to 5650. Remember that - as I’ve discussed daily - institutions leave footprints on the price chart indicating when they are accumulating. Those footprints are my core setup: The Failed Breakdown, and early last week, we saw multiple, with ES painting numerous on the chart. Its why I wrote last Wednesday at 4pm: “We remain in a large consolidation now, and its a flag. My general lean is always to defer to the trend. We can fill this out, then breakout sees 5698, 5720, 5734-36.” On Thursday we hit 5736, which was the high of last week.
The task for bulls this week, was to continue to run it, and they did, getting to 5870s, yesterday. The task for today would be for bulls to buy any CPI dips, and keep it going. I wrote yesterday at the close: “Its been a hugely profitable run and I am +250 points now on my most recent long..My general lean is always to defer to the trend until it ends. This means bulls want to hold 5850, 5815 on any CPI flushes (I’ll be watching for failed breakdowns). Next target slate is 5890, 5910, 5926. If 5815 fails we can see what bears have up their sleeve.” This played out perfectly. Before CPI, we flushed 5850, recovered, then rallied to 5926.
We aren’t far from All Time Highs now. Can we get there? In today’s newsletter I’ll talk this, I’ll discuss in a little more detail two recent Failed Breakdowns that provided optionality to add exposure to this rally. One on Friday morning and one yesterday morning where we lost and recovered the 5815 shelf. Finally, I’ll talk the actionable trade plan for tomorrow.