SPX Is Coiled Tight For A Huge Move. What Way? May 8 Plan
It was one month ago yesterday that ES set its major bottom at 4835 and since then, its been in what I’ve called buy dips mode. We have had lots of dips over the last month 300 point dips, 150 point dips, and every combination in between but there has been underlying bid that was not there in February, March, and early April. The last 9 days prior to the start of this week, ES did not put in a single green day, as buy dips mode went into over-drive.
This week started off by breaking that rally cycle, by putting in two red days in a row. This was not surprising and as I wrote on Friday at 4pm: “We are 9 green days in a row and its not uncommon to see what I call “hangover Monday” and we spent Monday into yesterday’s close in a choppy correction
Today was FOMC day, and the task for bulls would be to buy that dip. Remember that dips are always bought via my core setup: The Failed Breakdown. In this case, the Failed Breakdown of yesterdays daily low at 5607 would be the actionable setup for today and I wrote yesterday at 4pm: “Below 5620, we should see a new low to 5597-5600. Instead of just buying this, a safer bet is to wait for the Failed Breakdown of today’s low which is just a little above at 5607.” At 4:40PM last night, we lost 5607, put in a Failed Breakdown of yesterdays 5607 low, and squeezed violently to 5689. This was a fantastic, 80+ point long. Then today, after FOMC - for those who missed the first setup - we got exactly this again. We sold down to 5597-5600 exactly, recovered 5607, then squeezed to 5670s again.
Ultimately though, we are rangebound still. Can bulls turn this dip buying into a new high? In today’s newsletter I’ll talk this, I’ll do a deep dive into three quality setups we have had this week via my methodology: A Failed Breakdown on Monday (my core setup, which took us to Monday’s 5706 high) then a Breakdown Short (my third setup type, which caused yesterdays sell). Finally, I’ll discuss the actionable trade plan for tomorrow.