SPX Is Coiled Tight, Big Move Coming. Up, or Down? Oct 23 Plan
As I’ve discussed for the the past few days, something important from a technical analysis perspective happened on Tuesday October 8th: ES broke out a perfect, two week bull flag. I warned about this on October 7th, when I wrote: “Bull case tomorrow: No change. 5734 to 5805 is a large consolidation, and this consolidation is a bull flag. If this flag breaks out, we see a new ATH to 5846+”, and we squeezed 150 points after this, making 4 new all time highs since. This was one of many examples of how effective pure price action is to cut through the multitude of noise out there. You don’t need to be a macroeconomist, you don’t need to read the news, you don’t need to watch CNBC or study seasonals. Price tells us everything (and the only thing) we need to know: What institutions are likely doing *now*. We just need to follow and manage risk.
This bull flag breakout was a footprint of serious institutional accumulation and the continuution of the most staggering rally leg of 2024 which has been so substantial that - as mentioned for the past few days - ES has been unable to string together two red days in a row since the September pullback ended on September 6th. This was 1.5 months without a more than one red day pullback.
This was the case today as well and after a 30 point overnight selloff. I wrote yesterday at 4pm: “There is a possible entry here on a failed breakdown of today’s low at 5865”. We saw this first thing this morning before the open. We flushed yesterdays 5865 lows by a couple points, trapped shorts - put in my core entry setup (the failed breakdown) to trigger longs, then rallied for 30 points to 5902+ into the close.
Ultimately though, ES has spent the last 1.5 weeks in a large range mostly between 5915 and 5850s, going nowhere. This is coiled very tight now, and a move is coming.
What way? In today’s newsletter I’ll talk this, I’ll go over two quality Failed Breakdowns we have had this week - both very textbook examples and good templates to use for those learning to spot these in real-time. Finally, I’ll discuss the actionable trade plan for tomorrow.