SPX Is Coiled Ultra-Tight For Another Move. What Way? Feb 9 plan

As readers know, ES started this week off by building a perfect bull flag from Monday to Tuesday and this culminated explosively with yet another leg up yesterday. I wrote back on Tuesday: “ES is in the process of building out a bull flag. I consider support of this structure to be 4947 now, and resistance 4970…As long as the flag continues to hold we continue up to 4977, 4990, 5000+”. Longs on this paid out, and we ran to 5018 yesterday, where the profit take was.

This rally is part of a bigger uptrend cycle that began back on January 19th, when ES formally broke out a month long, textbook inverse head and shoulders pattern at 4825, commencing what would be a multi-week period of “buy every dip” as I’ve posted daily. Since January 15th, the last 15 trades have only seen three isolated red days and not one of those days saw any follow through. After the most recent leg of this rally yesterday though, what did we see today? Tight rangebound chop; as usual after a big run. I wrote yesterday: “Defenses of 5009 are of interest to me, especially if we can hold it then return to 5018 to build a base 5009-5018” and we spent nearly all day in this range.

We are coiled tightly, yet again, for another move. What way are we headed, and what pattern has formed? In today’s newsletter, I’ll talk this, I’ll then do a deep dive into the setup that caused yesterdays run up (its my secondary setup type - the backtest). I’ll then provide the actionable trade plan for tomorrow.