SPX Is Coiled Ultra Tight At The Highs. A Move Is Coming. What Way? June 5 Plan
Heading into today, ES had spent the prior three weeks inside a massive consolidation. This consolidation at its widest was generally 5850 support to ~5987 resistance with 5925 being a magnet in the middle, and as I’ve discussed at length, its a massive inverse head and shoulders pattern. From a day traders perspective, ranges like this are an absolute gold mine (swing traders have their fun when the ranges break out). For a Failed Breakdown trader like myself, they are a double gold mine, because inside ranges like this price repeats the same tendency over and over: It heads down near support, flushes a nearby low, traps shorts, rallies. It does this day after day, sometimes for weeks, until the range explodes. This is how institutions accumulate large long positions.
Its exactly how we started this week. I wrote last Friday at 4pm that: “Below 5893 is 5877 and this has been critical all day today. I’d be watching the reaction there and if we can flush it down to 5870 and recover, this would be ideal.” and “Bulls control above 5877. 5925 recovery starts us up to 5936, 5945, then 5965-70.” Monday we flushed 5877 down to 5870, trapped shorts, and were off to the races, getting to 5965-70 yesterday.
It’s also important to remember that this gigantic range has taken place in the context of what I have called (everyday since April 6th) the “buy dips regime”. For nearly two months now, we’ve had tons of dips. But they get bought, often within the same day, and in the worst case, it takes a few days. With ES closing up near 3 week range resistance yesterday, the task for bulls today would be to see if it can breach resistance. I wrote yesterday: “In the ultra bull case, ES will just flag out below today’s highs [5890s] and above 5965 or so, forming a tight bull flag.” and “Bulls are going to want to defend the supports discussed above on any retraces tomorrow, then next leg up targets 6k, 6020, 6040+.” We spent nearly all day today flagging out above 5965 and below yesterdays highs, getting to around 6k at highest and then consolidating further.
Since May 13th, ES has been stuck in this high 5900s zone, and its been a stubborn shelf. We spent coiled tight near those highs. Can ES push through them, or is another trip down the range coming? In today’s newsletter I’ll talk this, I’ll do a deep dive into the setup that started this rally last Friday and originally got me long as updated everyday since then (remember *all* rallies start with a large Failed Breakdown/trap). This was no different. Finally, I’ll talk the actionable trade plan for tomorrow.