SPX Just Made Its 23rd New All Time High of 2024. New Leg Up, Or Bull Trap?

I began my newsletter yesterday by quantifying just how powerful this recent leg up in ES has been by citing an interesting fact: I wrote that since the September 6th low (from which we rallied 460+ points), ES had been unable to put in two consecutive red days in a row. While we did have many dips (usually 70 points or so is that standard sized selloff in an uptrend) all these dips were promptly bought the next day.

This was true this week as well and ES put in one of those rare red days on Tuesday for the standard 70 point selloff. Like all the others though, it was bought, and by this morning we found ourselves back at all time highs. This recent leg into all time highs was triggered by - like all significant rallies - a Failed Breakdown/Level Reclaim that we had overnight. Remember that institutions trap by their nature and in order to enter, they need to hunt liquidity to absorb their orders, and the best way to do that is via a trap. I wrote in yesterdays newsletter: “For tomorrow, 5878-80 is 1st down from here. This is a risky zone to bid since its quite close to the major 5892 resistance we just backtested late day today. While one could give it a shot, read the reaction there first or wait for it to flush a little and recover”. Last evening/overnight, we saw exactly this. We tested down to 5878-80, flushed it to 5871, trapped bears, then squeezed to 5923+ by the open today.

Bulls however, were unable to hold the ATH into the close today. Is a new leg up starting, or was this a bull trap? In today’s newsletter I’ll talk this, I’ll do a deep dive into a Failed Breakdown (my core setup) we had yesterday that triggered this mornings 70+ point rally. This was a good example of how powerful (and in many ways, simple) this setup can be. Finally, I’ll discuss the actionable trade plan for Friday.