SPX Is Coiled Tight. Another Move Is Coming. What Way? May 15 Plan
Yesterday and today saw the continuation of a parabolic rally in ES, and this parabolic move in itself was ultimately a continuation of what I have called - everyday in this newsletter since the macro low on April 6th - buy dips mode. As I’ve frequently said, its essential to know the broad regime that price is in (buy dips or sell bounces), even as day traders. Knowing this reduces the #1 most preventable source of losses: Counter-Trending.
As I’ve also discussed at length that institutions buy dips in a particular way. They put in my core setup, the Failed Breakdown, whereby they flush a major low, trap shorts, recover the low, then squeeze. As readers know, last Wednesday after FOMC, we saw a massive Failed Breakdown where we flushed the prior days low at 5606, recovered, and I was long since then for what turned into a 300+ point rally, one of the largest of the year. This Failed Breakdown was the final trigger as well for the breakout of a 1 week bull flag pattern we built into last Wednesday. We broke it out, and were off.
Heading into yesterday’s CPI report, I verified I was still holding this long again at the close yesterday, stating: “Its been an incredible session and days like today are exactly why I hold runners. I am still holding my 10% long runner from last Wednesday at 5605-08.” ES still had more left in the tank for this and I stated at Monday’s close that: “Its been a hugely profitable run and I am +250 points now on my most recent long..My general lean is always to defer to the trend until it ends. This means bulls want to hold 5850, 5815 on any CPI flushes (I’ll be watching for failed breakdowns). Next target slate is 5890, 5910, 5926. If 5815 fails we can see what bears have up their sleeve.” This played out perfectly. Before CPI, we flushed 5850, recovered it, then rallied to 5926 which was the exact high of day yesterday.
Heading into today, we simply continue riding the trend and as I wrote yesterday: “My general lean is always to defer to the trend until supports fail.” This would mean base out, then continue up. I wrote yesterday: “My general lean is that 5900/5889 is first support cluster, with 5850 below. Bulls will need to hold those tomorrow to keep this parabola going back to 5925, base out, then onto 5963/5970, then 6000.” We spent all day basing out exactly above those supports at 5900/5889 and below 5925.
We are coiled tight and another move is coming. Will it be up again? In today’s newsletter I’ll talk this, and I’ll do a deep dive into exactly how my trailing stop methodology works, and how I was able to hold my runner from last Wednesday for 300+ points. It is highly systematic and I do the same thing every trade. Finally, I’ll discuss the actionable trade plan for tomorrow.