SPX is Coiled Up Tight Again. Another Leg Is Coming, but What Way? June 13 Plan
Last Friday, something important happened in ES. For the last three weeks, I’ve spoken about how since May 13th, ES had built out a large inverse head and shoulders pattern: May 15th was left shoulder, May 23rd was the head, May 30th was the right shoulder. The neckline was located at about 6k, which was resistance for over a month. On Friday ES finally broke out this pattern and rallied to 6047. While I am a Failed Breakdown day trader who is purely focused on waiting for the next Failed Breakdown, taking my entry, and managing it level to level, this broad context is nonetheless important.
All week (including today), it would be up to bulls to stay above that ~6k zone again (with traps below being bought as always) to keep the run going. Remember that institutions accumulate by flushing major lows, trapping shorts, then they enter. My edge as a Failed Breakdown trader is to wait for these traps, then enter afterwards. I wrote yesterday at 4pm that: “One possible trade would be if we could test 5987 then put in a Failed Breakdown of the 5992 Tuesday daily low.” Overnight, we sold down to 5987 exact, recovered Tuesdays 5992 *and* 6k, then rallied. I also wrote: “My lean is we work up to 6047 again, dip, then try to 6064+…We may work on more structure there, but when its done the next leg to new highs would target 6084, 6110, then 6155.” By 11am, we got to 6047 then spent the rest of the day basing below
Ultimately, ES has spent all week building out a large range mostly between between 6k and 6047, with some brief excursions above and below. Its coiled tight. Is a trend leg incoming? In today’s newsletter I’ll talk this, I’ll do a deep dive into a variation of my core setup (the Failed Breakdown) called the “double dip” Failed Breakdown. We saw a powerful example of this early Tuesday morning below 6k, and it ultimately was the setup that triggered the powerful rally we saw yesterdays high. It’s important to be able to spot these. Finally, I’ll discuss the actionable trade plan for tomorrow.