SPX Is Building *Another* Base. Trend Leg Coming? May 21 Plan
At the end of April, market commentary was inundated with “Sell in May and Go Away”, and its been a good month for those who ignore platitudes and instead deal in price action. This is because on May 6th, instead of selling, ES chose to break out a month long bull flag pattern instead. I warned about this, writing on May 3rd: “5155: Resistance of the major red downtrend channel/flag shown in the below chart. Leg to revisit the highs begins above here”. This put ES into “buy all dips mode” and we got to the highs, with ES only putting in a singular red day in the past two weeks.
After this latest leg up, we have spent the last few days resting and digesting this monster leg up. I wrote yesterday: “My general lean is always to defer to the trend. 5309-11 to 5342-45 is a new basing range and 5317 is a key pivot inside this range. We likely play inside this range more (perhaps pop to 5333 or 5342, dip again to supports etc)”. Like Friday, we spent much of today doing exactly this, and we popped to 5345ish early in the session, then dipped to stay stuck inside the range, basing around 5333 all afternoon.
For now, SPX is coiling up into another base. Will it break upwards again? In today’s newsletter I’ll talk this, I’ll go over a very textbook example of my core setup - the failed breakdown - that occurred Friday afternoon and started the rally to 5340s today (this is a quality example of the setup and serves as a good mental template for learners hunting for new failed breakdowns daily). Finally, I’ll discuss the actionable trade plan for tomorrow.