SPX Spent All Week Basing. Is It Ready To Trend Now? June 2nd Plan
NOTE: This is a resend of the newsletter for Monday June 2nd, originally sent on Friday at 4pm, for those who did not receive.
Every newsletter now since April 6th, I’ve started off the exact same way: By reminding readers that for nearly two months now, ES has been in what I’ve called buy dips mode. While we are day traders, its nonetheless essential to properly identify the trend because 90% of trading is just getting the trend right. If you getting it wrong, you are swimming upstream.
More specifically though institutions in ES go about buying dips in a very standardized manner, and I’ve built my career exploiting it. Specifically, they put in Failed Breakdowns: They find a low (usually the prior days low), flush it, grab liquidity/trap shorts, then price rallies. This week, ES has thrown plenty of dips at ES and every single day, it was bought with a Failed Breakdown.
We saw a sell on Wednesday prior to Nvidia earnings. I sent my newsletter out early at 2:45PM Wednesday, stating: “My general lean is that ES can continue building out structure 5945-5910 and as long as 5910 holds (or traps below) 5945, 5957, then 5970-75 remain in play.” We trapped below 5910, sold to ~5890 Wednesday low of day, then by 420PM Wednesday, Nvidia earnings hit, and we recovered it. We ran to 5970-75 target by 7pm Wednesday, then parabolic to 6k Wednesday high.
Then yesterday, ES threw another dip at us. We sold from 6k down to 5884. Yet again, the dip was bought up, we put in a Failed Breakdown of Wednesday’s 5890 low, and rallied to 5925+. Today, the task for bulls was to buy the daily dip up again. I wrote yesterday at 4pm: “5877 is below there. This is a very important level. Instead of bidding it, the obvious setup is to wait for it to test then recover today’s daily low which is at 5884 now.” At 8:15AM, we saw exactly this and tested 5877, recovered 5884, then rallied to 5920-25. While this was a fantastic trade, bulls couldn’t stick it, and we flushed 5877 around 12:30PM down to 5850.
What happened from there? You guessed it. The dip was bought, we recovered 5877, the Failed Breakdown was put in, and we squeezed to 5925+. This is all I do everyday.
Ultimately though, ES has spent most this week chopping around the 5925 level and most dip buys have ended right there. Is it ready to trend? We’re close now. In today’s newsletter I’ll talk this, I’ll do a deep dive into some of the action we’ve seen this week as there’s been an enormous multitude of Failed Breakdowns of different varieties. If you understood this weeks Failed Breakdowns, you understand Failed Breakdowns. Finally, I’ll discuss the actionable trade plan for tomorrow.