SPX Makes A New High, Then Sells. Will Today's Dip Get Bought? June 12th Plan
I am a day trader which means all I care about is ultimately waiting for my core setup (Failed Breakdown) grabbing my points, then shutting down the platform everyday, but the broad context is nonetheless important to keep in mind. On that front, I’ve made two things clear every single day for over two months now. Firstly, since April 6th, ES has been in a massive uptrend which I have called everyday since the “buy dips regime”. Readers following this newsletter should have been almost entirely long this entire run with little to no shorts.
Secondly, since May 13th ES had built a massive, bullish inverse head and shoulders pattern: May 15th was left shoulder, May 23rd was the head, May 30th was theright shoulder. The neckline was located at about 6k, which we tested 7x since May 19th from below. On Friday ES finally broke out this pattern. The task this week would be for bulls to defend the 6k back-test. Remember though that ES rarely just back-tests levels cleanly, rather it puts in multiple traps (Failed Breakdown) which is how instititions accumulate. I concluded my Monday newsletter at 4pm (when were 6005) by stating that bulls would be able to successfully defend this bullish inverse head and shoulders back-test then rally, stating: “My lean is we flag out above 6k (with 6k flushes below being traps), then we fill out to 6020. Above there, we see 6029, 6038, then 6055+” This played out perfectly yesterday. Overnight Monday into Tuesday, we trapped below 6k twice, trapping bears again, and we squeezed into the afternoon to 6050+ yesterday
Today however, was CPI day and bulls would have to keep it going. My lean was - as always - they would. I wrote at 4pm yesterday: “In an “ultra bull case” tomorrow, ES won’t even test 6k again. In this scenario, ES will start working on a bull flag above 6029 and below 6047. As with any flag, traps below support are actionable. From there, we can start the next leg….The next leg up targets 6060, 6072, then 6110.” We saw exactly this today, trapping below 6029 all last evening/into this morning (Failed Breakdowns to trigger long), then after CPI at 830AM, we rallied to 6072 target, set the high of day, then sold.
Its another day, and another new high for ES, but today’s was sold off late day. Will today’s dip get bought? In today’s newsletter I’ll talk this, I’ll do a deep dive into how my trailing stop methodology works (this is a critical part of my system and is what allows me to stay onboard for extended runs), and I will also overview two quality Failed Breakdowns we had Monday overnight/early Tuesday morning. Finally, I’ll discuss the actionable trade plan for tomorrow.