SPX Puts In Its 1st Red Week In 4 Weeks, But Is Holiday Strength Coming? Dec 16 Plan
While this week was mostly basing, its been perhaps one of the best weeks of the year for demonstrating the components of my system. One week ago last Friday, ES had just concluded an incredible 13 days in a row of parabolic upside, making a higher high each day for that stretch. This parabolic rally was no surprise, and was the result of breakout out a massive two week bull flag on November 24th.
As readers know, ES is highly predictable and after strong trend moves, comes consolidation or base building around a magnet level which we can play over and over. A range must form to setup the next move and these ranges are absolute goldmines for my core setup (the Failed Breakdown) and level to level trading. In this weeks case, the range was 6060 to 6100 or so. I wrote last Friday: “It would not shock me if this 6063 level turned into a “magnet level” which we trap below over over for several days and build a new base”. We tested 6060 Monday, put in a huge Failed Breakdown down to 6040 on Tuesday, then recovered Wednesday, getting us long for a run to to 6100 resistance.
On Wednesday at 4pm however (when we were 6090s), I warned readers that we were probably not done with the 6055-60 magnet, writing: “We remain inside the Mode 2 range discussed in the Daily Summary above, with resistance roughly 6102 and support down at 6060-55. This range could easily fill out and morph for many more days (including several more tests of the 6060-55 magnet)”. Yesterday, we closed right 6060-55. From there? Back up the range.
I provided traders the 6055-60 long in real-time at 4pm yesterdays newsletter, adding: “6055-60 to 6101=the multiday range. My general lean is always to defer to the trend. As long as 6055-60 defends, we will simply work back up the range. This would target 6075-80, 6087, then 6101”. By this morning we had hit ~6087, before revisiting the 6055-60 magnet by 10am today, flushing it, and closing a little below the 6060 level.
This week of basing meant ES put in a red week, but this base won’t last forever and eventually, it will breakout. What way? In today’s newsletter I’ll talk this, I’ll do a deep dive into how my core setups (Failed Breakdown and Back-tests) apply to this level (you will see these setups at a magnet level virtually every week for the rst of of your career). Finally, I’ll discuss the actionable trade plan for tomorrow.