July 4th Week Bullish As Usual In SPX, But Can Bulls Keep The Momentum Up? July 2nd Plan
We began this week with quite the feat for ES: 6 green days in a row. We followed it up with 7 today. Its worth noting though that this 7 day rally is not a coincidence whatsoever. Its the normal, fully predictable consequence of something that happened on Monday June 23rd: ES broke out of a two week bullish triangle with support at 5979 and resistance now down at 6051. What happens when a two week chart pattern breaks out? Most commonly, two weeks of rally.
I provided this setup way back on Friday June 20th 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 last Tuesday, we got to 6143.
I was looking higher from there, writing last Wednesday at 4pm: “My general lean is always to defer to the trend. ES broke out a two week triangle on Monday 5979-82 to 6081. 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 6208+ by Friday morning.
And from there? More. I wrote on Friday at 4pm: “My lean is, as always, to defer to the trend. This sets up the next leg to 6250, 6279, then 6300+ when ready” ES wasted no time here and by yesterday morning, ES tagged 6250.
While chart patterns can be useful in terms of giving us a big picture lean, at the end of the day, we have to trade it, and for me, this is always done the same way and my system is built to tag along with institutional accumulation patterns. How do insitutions long? They wait for a bearish headline to hit. This causes price to flush a major low. Under those lows is liquidity (stops, bears chasing short). Institutions use that liquidity to absorb their buy orders, the low recovers, and we squeeze. This setup gets me long, and its what we saw on Sunday June 22nd down at 5979 that started this 280+ point leg up. We’ve seen roughly one per day since in addition to this. After entry, I begin to trail a stop on my runner, and since we’ve had no substantial dips for 6 days where the prior days low has failed, this runner lasted into today.
After the type of run we’ve had though, ES would need some time to build structure/work on a range. I specified this at the close yesterday: “My general lean is always to defer to the trend until it ends. I’ve been doing this for the last 1200+ points since the April low, and we never fight the trend or “try to be first” into a reversal. 6227-32 to 6250=a range. This sets up 6271, 6280, then ATHs to 6315, 6320-25. If 6227-32 fails, ES can try a dip.” We spend today filling out this range exactly. At 820AM we tested 6227-32 exact, and rallied to 6250 and spent all day ping ponging this.
As mentioend yesterday, this week short holiday week seasonally strong (green 80% of the past 10 years with 2x the average weekly return). Can we end it with more upside? In today’s newslette I’ll talk this, I’ll do a deep dive into some of the quality Failed Breakdown’s we’ve had this past week (its been a goldmine and good opportunity to learn). Finally, I’ll discuss the actionable trade plan for tomorrow.