SPX Has Formally Broken Out Its Downtrend. Can It Sustain? May 7 Plan
Patience has finally paid out for longs. I spent the second week of April speaking daily here(when we were in the midst of the largest red-day streak since September 2022) about the conditions that would lead to sustained recovery and short squeeze in ES and cause a regime change from the “sell the bounce” of early April to a new “buy the dip” regime. That condition was met on April 22nd when ES reclaimed the heavily contested 5045 level and since then - as I have mentioned every single day since at the start of this newsletter - ES has been back to buy the dip mode.
Since then, every single dip has been bought for a two week rally, and buy it I did. As readers know, I have been long since 5048 on Thursday when ES put in a textbook, failed breakdown, writing last Wednesday: “An alternative to buying [5048 again] would be to wait for a failed breakdown of today’s low”. This played out explosively for +150 points into today, my longest trade of the year in point terms to my recollection. I was holding this runner over the weekend, writing on Friday: “I am holding my 10% long runner over the weekend”, adding “If bulls are motivated, we will just base out >5136 which would setup 5176-86, dip zone, then 5200+”. This morning, we got to 5186, spent hours basing there, then pushed higher to 5200+ into the close.
Most notable, is that ES broken out its core downtrend channel from the April high, which controlled all April’s selling. Can bulls run with it now? In today’s newsletter I’ll talk this, I’ll go into more detail on the setup that got me long on Thursday, and the trailing stop methodology that kept me in since then (it is the same for every trade). Finally, I’ll discuss the actionable trade plan for tomorrow.