SPX Is Ultra-Coiled For A Breakout. What Way? Jan 17th Plan

As readers recall, 2024 started off with something very rare in ES - a sustained, multi-day dip, but on Friday January 5th, this very abruptly ended when we tested 4705 and squeezed. Back then, I referred to this day as “a passing of the baton moment from sell the bounce to buy the dip again” and since January 5th, every single dip in ES has been reliably bought and it has been a good couple weeks for buying those dips. The technical reason for why we switched back to buy the dip was because we back-tested the December 13th FOMC breakout. Technical analysis 101.

For the past several days however, ES has been stuck inside brutal chop. I wrote on Friday: “Generally, 4833-4796 or so now is “chop within chop” and we are coiled very tightly in this range, with 4822 a major pivot inside it. Everything in this range is poor-follow through noise, and if you over-trade, you will get chopped up and lose money”. This could not have been more descriptive for today, and after testing 4822 twice on Monday, we ping ponged in this range, with multiple flushes below 4796 all of which were bought.

We are coiled up for what should be a substantial trend leg. But what way, and what is the pattern? In today’s newsletter I’ll talk this, I’ll then continue my ongoing series into the failed breakdown (my core setup) and the nuances of identifying it in context. I’ll then discuss the actionable trade plan for tomorrow.