SPX Is Coiled Tight For A Week Now. Trend Move Coming? Dec 13 Plan
On November 24th, ES broke out a textbook two week bull week - and as readers were well positioned for - it set us up for 2 weeks of upside. Technical analysis 101: Two structures on average result in two week rallies and ES saw a staggering 13 days in a row of higher highs whereby it cleared the prior days high each day. This is a parabolic rally. Markets however cannot move in straight lines forever and they inevitably need to consolidate and build other base to setup the next move. Since last Thursday/Friday ES has done this, and I warned last Friday: “It would not shock me if this 6063 level turned into a “magnet level” which we trap below over over for several days and build a new base”.
This is exactly what we saw and 6060- has been the general foundation of a multi-day base with 6103 or so being resistance. 6060 tested over 8x and on Tuesday ES broke it down in the afternoon that day to 6040, setting up my core setup type: The Failed Breakdown. I wrote on Tuesday at 4pm: “We are in a mild dip now and for tomorrow the bull case is quite simple: 6060 has to recover, which would squeeze us up to 6074, 6092+. On a CPI day, this can happen instantly”. At 830AM yesterday, we got this setup exactly, popping up to 6092+. This took us to resistance of the multi-day range.
What happens at resistance of ranges? Typically, ES pulls back and its why I wrote at 4pm yesterday: “6060-6103=the current Mode 2 range. My general lean is this fills out more tomorrow to the downside levels discussed above.” We got right to work on this last evening, dipping from 6103 and getting to ~6060 by the close today.
I also wrote: “For tomorrow, we remain inside the Mode 2 range discussed in the Daily Summary above, with resistance roughly 6102 and support down at 6060-55. This range could easily fill out and morph for many more days (including several more tests of the 6060-55 magnet)”. Today, we closed right here.
We are now coiled up in a week long base. Is a breakout coming? In today’s newsletter I’ll talk this, I’ll do a deep dive into the action we saw late day Tuesday and early Wednesday where we flushed 6063 by 20 points (breakdown), then recovered (failed breakdown), to trigger a monster squeeze yesterday. My entire edge is built on exploiting what we saw in this phase and we see it over and over on various scales every week. Finally, I’ll discuss the actionable trade plan for tomorrow.