SPX Has Not Had A Real Red Day Since Jan 10th. How Will The Week End? Jan 24 Plan
We headed into today in ES on the back of a staggering 7 days straight of upside, 320+ points from the Monday January 13th low. We were on board for nearly all of it, and readers know that the technical cause of this rally was straight forward. For the last 2 months, ES had built a picture perfect “Megaphone” pattern, with 5810 support and 6250+ resistance. Megaphones (also known as broadening formations) have a particular tendency. They fill out. When we tested 5810 support on January 13th and put in a green day, I was looking one direction only: Up.
I wrote last Tuesday at 4pm: “My general lean is that a relief bounce leg began on Monday by testing megaphone support, and is underway. This would target 5934-36, 5965, then 5996/6004 if bulls really want to move”. By last Thursday, we got to 6004.
This was only the start though, and I was looking for this to stretch even further, to back-test some of the structure that we built in mid-December before the FOMC melt-down on December 18th. Most recently, at the close this Tuesday, I wrote: “I wrote at the close Tuesday: “My general lean is always just to defer to the trend until it ends. Bulls control above 6016-20 with 6071 defending in the case of the ultra bull case. 6105, 6115, then 6137-45 are next macro targets”. We got to ~6137 yesterday which remained a resistance most of today.
After this, ES spent today building a base and I was looking for this to setup higher. As I wrote yesterday: “If I had to provide a lean though, it would be that ES can attempt to pullback or build structure now. 6115 is first down, then 6086, then 6072. Bulls will need to defend those to setup the next leg targetting 6154, then 6172, then the 6185 ATH.” We got to 6154 high of day today. As stated in title, ES has not had a true red day since January 10th (we had a couple Doji type sessions) and every dip is rapidly bought. Can we close the week with more?
In today’s newsletter, I’ll talk this, I’ll discuss the particular combination of factors that caused the squeeze from 5996 Monday to 6137+ this week. It was a combination that is very common: A news driven “Tape bomb” which produced my core setup: The Failed Breakdown. Finally, I’ll discuss the actionable trade plan for tomorrow.