SPX Breaks Out Again. New Leg Up, Or Blow Off Top? June 18 Plan
The last week has been an enormous victory for what I often call “Technical Analysis 101”. When I say this, I am referring to the ability of simple patterns, and a few simple entry setups to keep us on the right side of the market, and cut through the enormous amount of noise out there. While many are focused on things like macro which have zero utility in timing the markets (and timing is how we make money) technicals tell us what institutions are doing right now, at this very second, so we can follow. And the technicals have been unequivocally bullish.
As readers know (and as provided clearly to readers in advance), I was long last Tuesday prior to CPI and after a 100+ point rally, we got to 5512, which had been my target for well over a month. This was resistance of a 3 month “megaphone” pattern, and megaphones, by their nature, fill out. I affirmed this last Tuesday by writing: “5511-5513: First major new all time highs target… which forms a massive “megaphone pattern” that encompasses all the action since February. This is a magnet now.” We hit it last Wednesday and then, spent two days, we have been stuck underneath it building a new pattern. The pattern? As I discussed on Friday, this new pattern was a “picture perfect bull flag”.
I wrote Friday: “My general lean is always to defer to the trend. 5457-5513=the new chop zone/flag. We could certainly fill it out more, but as long as supports continue holding, we can break higher to 5518, 5534+”. This morning, we got right to work breaking out that flag, breaking out the megaphone, and getting to 5534 by 1pm, and stretching far beyond.
We have now broken out a massive, 3 month long “megaphone pattern”, are we beginning a new leg up? In today’s newsletter I’ll talk this, I’ll go over three high quality examples of my core setup (the failed breakdown) that we had Tuesday, Thursday, and Friday (and ultimately had me long into today). Finally, I’ll discuss the actionable trade plan for tomorrow.