Multi-Week Pattern Breakout For SPX, Where Now? Oct 26 Trade Plan

Yesterday, my newsletter was entitled: “A New, Key Multi-Week Pattern Has Formed for SPX”. As readers know, this pattern was in fact a perfect one month long inverse head and shoulders pattern on the daily chart. As I described yesterday, this pattern broke out at approximately 3770 nd I wrote I was running long. Price wasted absolutely no time today getting moving on this, and shortly after the open today ES went straight into melt-up mode. Moves like today’s show the power of classic, simple technical analysis.

I wrote yesterday: “My general lean remains unchanged - I will go with this breakout and assume the bear market rally has room to run to 3870ish”. We got there today. These are very interesting times. On one hand, ES just broke out a month long pattern - month long pattern breakouts rarely end in one day and typically see sustained moves up. On the other hand though, RSI continues to be very overbought, and we have a major week of catalysts coming up next week with FOMC + mid-terms

In today’s newsletter, I’ll talk about what the measured move/ultimate targets for this pattern are, breakdown the setup discussed yesterday that provided the entry for today’s rally, then talk the risks and plan tomorrow.