SPX Is Coiled For A Big Move. What Way? Jan 30th Plan

This week started off with my absolute favorite combination of price action: As I’ve discussed for days ES has two things it loves to do when volatility ramps: It goes “elevator down” which refers to few hour free falls like we saw right off the Sunday gap down open, and then it puts my core setup - the Failed Breakdown - and initiates a face ripping short squeeze.

After 170+ point “elevator down” sell to start the week, we got a massive Failed Breakdown, and as provided to readers, longs were triggered. In this case, the Failed Breakdown was of last Mondays ~5997 low. We lost it, recovered before the open Monday, and longs were triggered. I had a few broad targets for this long but the obvious was to fill the opening gap from Sunday evening.

I wrote at 4pm on Monday’s close” “My general lean for tomorrow is ES can do some more back-testing. 6068-71 is 1st up, and if bulls are really energized, can make the run for 6082 then 6115-20” and “For now though, the bull case is that we got a short squeeze trigger on the Failed Breakdown of 5997 this morning at 8am, which triggered longs. The bull case ES can now begin back-testing with 6068-71 1st up. React there, then onto 6082, then 6115-20 to fill the gap.” By last night, we got to 6109 or so.

While this was a lucrative, 100+ point run, FOMC would decide its fate today. As I wrote yesterday, FOMC days are the most volatile,difficult catalysts of the year, and they are characterized by 1 thing: Traps. Today’s FOMC plan was all about 1 level: 6066-70 and I wrote yesterday: “On a normal day though, the bull case is simple that ES defends 6066-70 ideally and build a base above it. If we see any rapid traps down, bulls will want to keep it above 6016 or 6008.” ES spent all day engaging this level, flushing it right FOMC, and recovering it multiple times, to close above it.

Are we just coiling up for more upside? In today’s newsletter I’ll talk this, I’ll do a deep dive into the combination of Failed Breakdowns (my core setup) that triggered the monster long into FOMC. Finally, I’ll discuss the actionable trade plan for tomorrow.