SPX Has Been In The Same Range For 3 Weeks. Breakout Next Week? June 23 Plan
A little over a week ago, ES saw the re-introduction of volatility with an outbreak of Middle Eastern tensions. Despite this however, ES had been unable to leave a massive range which it had been building out since June 5th. This range - as discussed at length - has been 5979-82 to 6099, with 6050 being a large “magnet” in the middle. This range itself has been embedded within a large uptrend that we have been in since April 6th. Everyday since then, I’ve started off each newsletter by reminding readers that ES remains in a buy dips regime. We get lots of dips, but they get bought up usually within a day or two. Never forget it.
How do I buy dips? The same way institutions do, via Failed Breakdowns. Institutions accumulate positions by flushing lows, trapping shorts, and squeezing. *Last Thursday evening* June 12th, we saw the mother of all dips where ES sold 125 points on the initial war outbreak. In doing so, it traversed the entire range discussed above from resistance at 6099, down to support at 5979-82. This in turn, setup a monster Failed Breakdown. I wrote early last week: “I especially like the Failed Breakdown of Thursday June 5th 5981 low especially if we tag 5978 first.” What did we see last Thursday evening? Exactly this. We tagged 5978, recovered the Thursday June 5th 5981 low, and longs triggered. This long produced a monster leg right up the range. On Monday, we hit 6099 range resistance. What came next? We sold down the range again.
Heading into Thursday/Friday (we were 6040 at Wednesday’s close), this range was likely to fill out more, and the main objective for bulls would be to test/Failed Breakdown the 5980ish range support to trigger back long and up he range. I wrote on Wednesday at 4pm: “My general lean is always to defer to the trend and ES is in a huge range from 5979 to 6099. My lean is we fill it out.” We sold down to 5979 by 10am Wednesday, flushed it by 10 points, trapped shorts, and longs were triggered. I provided this setup explictly to readers, stating: “I’d prefer to see a Failed Breakdown of last Thursdays 5980ish low to engage this though, perhaps down to 5973 and recover.” By this morning, we were back up the range to ~6050 magnet, squeezed beyond it, then retraced.
Ultimately though, ES has gone nowhere for 3 weeks. Can we leave this range next week? In today’s newsletter I’ll talk this, I’ll do a deep dive into three quality Failed Breakdowns we had this week (including the 5978-82 Failed Breakdown we had yesterday, plus a couple others on Tuesday and Wednesday). Finally, I’ll discuss the actionable trade plan for Monday.