SPX Is Coiling Tight For A Trend In The Coming Days. May 3rd Plan
Everyday since April 22nd, I have spoken about how ES has been in what I have called a relief bounce leg. This relief bounce leg saw 190 points to the upside so far, and occurred as the predictable consequence of the incredible 3 red week in a row, 6 red day in a row capitulatory move we saw on April 18th. As part of this, ES has seen a return to “buy the dip” and since April 18th-22nd, every dip in ES (and there have been some large ones) has been bought, preventing ES from putting in sustained selling lasting more than a day.
And at 4pm yesterday, I bought the dip again after an 85 point FOMC sell at 5048 as provided to readers yesterday. I concluded yesterdays newsletter by writing: “My general lean is as long as 5048-50 keeps hold, the relief rally is in tact, and we can work up to 5077-82, reaction zone, then 5102+”. This played out precisely to start the day, and we rallied to 5077-82 target, saw an early morning dip off that level. I wrote yesterday “An alternative to buying [5048 again] would be to wait for a failed breakdown of today’s low”, and we got precisely this in the morning, setting up longs again and rallying back to ~5102 target.
“Buy the dip” survived another day, but ES is ultimately still just consolidating in range for two weeks. It will setup a breakout, but what way? In today’s newsletter I’ll talk this, go over the setup that got me long yesterday morning for what turned out to be a 90 point FOMC rally, then discuss the actionable trade plan for tomorrow.