SPX Is Coiled Tight. Calm Before The Storm? May 22 Plan
As discussed, May started off with a “bang” breaking out a massive, month long bull flag on May 6rd that had formed for the entire month of April. I warned about on this on May 3rd writing, “5155: Resistance of the major red downtrend channel/flag shown in the below chart. Leg to revisit the highs begins above here”, and after this breakout, it was technical analysis 101: Month long breakouts, usually see equivalent length/magnitude rallies, and we’ve rallied since, revisiting the highs as expected, with ES now green 13 of the last 14 days.
Since last Wednesday though, ES has effectively gone nowhere, as we “digest” the move and build out a base. I wrote yesterday: “We are flagging out 5302-5347 with 5329 support inside it…If you over-trade in this zone, you will lose money. Wait patiently for price to “Wake up” with failed breakdowns or strong support tests before trading”. ES certainly took this literally today, and in the past week, we tested that 5329 level an incredible 11times, including five today, alongside a failed breakdown this morning of this level, pushing right up to 5347 resistance into the close.
We have now been consolidating sideways for nearly a full week, coiling tighter and tighter. A move is incoming (likely after Nvidia earnings tomorrow). In today’s newsletter I’ll talk this, I’ll do a deep dive into my core setup (the failed breakdown) as the last week or so has featured an unusually high prevalence of them, in a myriad of shapes and sizes. Finally, I’ll discuss the actionable trade plan for tomorrow.