SPX Made A New High This Week. Can Bulls Run It Next Week? June 9th Plan
NOTE: This is a resend of the newsletter for Monday June 9th, sent originally on Friday at 4pm, for those who did not receive.
Since May 13th, ES has been stuck inside a gigantic range, with support down at 5850, and resistance up at 5987-6k. I have described this range as being a massive bullish inverse head and shoulders pattern (May 15th left shoulder, May 23rd head, May 30th right shoulder). One week ago last Friday, we got long and began a trip to traverse this range from the bottom, to the top. I wrote last Friday May 31st - one week ago - at 4pm: “My general lean is always to defer to the trend. Bulls control above 5877. 5925 recovery starts us up to 5936, 5945, then 5965-70. Breakout above to 6k+.” By Wednesday, we had hit 6k. ES then spent yesterday trying repetitively to clear this level, attempting to do so on two occasions, and failed. As a result, we sold into the close yesterday.
While its fun to talk about big picture patterns, they are not particularly helpful with telling us when, where, and how to enter. To do that, the focus needs to be on execution and when it comes to execution, I only care about one thing. My core setup: The Failed Breakdown. Price finds a low/shelf of lows, flushes, traps bears, it recovers, and I long. This is also how institutions accumulate. Yesterday was an absolute Gold Mine for Failed Breakdown traders as institutions built a massive position. We spent all day Wednesday forming a shelf of lows at 5975 and this was the locus yesterday of multiple Failed Breakdowns. I wrote Wednesday at 4pm: “A flush of the whole 5975 shelf is also of interest. This could be a flush down to 5970 or 5956-61, then recovery of 5975 is actionable.” Yesterday we saw this over and over. At 830AM we dipped to 5970, recovered 5975, squeezed to 6014. At 10am, we dipped down to 5956-61, recovered 5975, rallied to 6008. At 10:50AM, we tested 5956-61 again and rallied to 5985. Ultimately though, bears won out the day for the first time in over a week, and after 4 tests of this 5956-61 support, it finally gave out, and ES sold into the close ending yesterday ~5945.
Today, the task for bulls would be to try and buy this dip, get back above 5975, then squeeze. My lean was they would do exactly that, and they did. I wrote yesterday at 4pm (when we were around 5945): “My general lean is as long as above 5925 (or can recover 5948-51), ES can work back to 5970-75 which was a big support all day today. If that clears, we rally to 5985, 6k+.” We saw this last night: By 8PM, ES recovered 5948 to trigger longs. By 830AM this morning, we were back to 5975. Then we ran to 5985, 6k+ targets.
We made a new high this week and closed outside the 3 week range we’ve been stuck in. Can it hold into next week? In today’s newsletter I’ll talk this, I’ll do a deep dive into some of extraordinary action we had yesterday/today with a focus on two things. 1) How my trailing stop methodology works and 2) I’ll cover some of the 5 separate Failed Breakdowns we had yesterday as there was a wide array to learn from. Finally, I’ll discuss the actionable trade plan for tomorrow.