SPX Breaks Out Its Two Week Range. Time To Run, Or Will It Fail? July 18 Plan
The last few days, I’ve spoken about what I call the market cycle in ES, in particular pertaining to uptrends (which we have been in since April 6th). ES spends about 75% of the time over the last 100 years in an uptrend, so if you are interested in trading it, you need to understand it well. Specifically, ES does two things: About 90% of the time, ES consolidates. I call this “Mode 2”. This is rangebound price action, that forms a chart pattern. The other 10% of the time, it trends. I call this “Mode 1”.
We’ve seen this cycle over and over since April 6th. For the two weeks prior to June 23rd, ES was rangebound mostly between 6081 and 5978. Pattern - as readers know - was a bullish descending triangle. It broke out June 2rd. Two weeks of consolidation typically lead to two weeks of trend, and as readers know my target for this breakout was ~6325. We hit that on July 2nd. Since July 2nd, ES has returned into Mode 2, and we had spent the last two+ weeks inside a new consolidation. The pattern? As stated daily, its been an ascending triangle.
I wrote at 4pm Tuesday: “Its been the same thing since early July and ES remains inside a triangle with 6271-68 support, and 6333 resistance. My general lean is always to defer to the trend. As long as the triangle support holds (or failed breakdown and quickly recover), ES can work back up the structure with 6301 being 1st target.” We saw exactly this yesterday. Tuesday evening, we tested 6271-68 triangle support. We spent all evening there. At 3am Wednesday, we put in a quick Failed Breakdown, trapped bears, and rallied to 6301 by 930AM. From there, we flushed back down the triangle and put in another Failed Breakdown down to 6240, trapped bears again, and headed back up to 6301 to close yesterday.
Heading into today, it was time for breakout. I wrote at 4pm yesterday: “The pattern remains a two+ week ascending triangle with resistance at 6333, support now at 6277/71. My general lean is always to defer to the trend. This means we head to 6311, 6319, then triangle resistance. Fill out, then when ES is ready, breakout targets 6341, 6348, 6372.” This played out incredibly well, and we hit 6333 triangle resistance by 11am, then broke out to 6341 by 3pm.
Is ES ready to breakout, or is more chop needed? In today’s newsletter I’ll talk this, I’ll do a deep dive into some of the quality Failed Breakdown’s we’ve had this week. When it comes to entries, all my entries are Failed Breakdowns, and we typically get 1-3 per day, but this week has been more prevalent. They are all given in advance, but I’ll recap in further detail Monday’s Failed Breakdowns, Tuesday’s, and yesterday’s which gave us a monster run from 6240’s to today’s high.