The Breakout Continues, When Will SPX Bulls Run Out of Steam? Feb 3rd Plan

For the past week, traders certainly got lesson in how powerful a simple, single trendline can be. As discussed extensively every single day, last Wednesday ES broke out of its core downtrend line from January 2022 at 4022. We then rallied a few days, then Tuesday of this week, we back-tested 4020. Afterwards, we went into vertical lift-off rallying 200 points. My target for this first leg was 4160 which hit yesterday.

In yesterdays newsletter, I wrote: “We will likely need to base build and chop traders up before running to 4180, then 4208”. This played out perfectly. Overnight, we built a base under 4160, then after some choppy morning action, we got the run to 4180 then clipped 4208 before starting a pullback.

While the broad structure remains bullish, we rallied 200+ points since Tuesday alone and the question is as always, how far can this stretch on this leg, and where does the rally truly fail? In today’s newsletter I’ll be talking this, talk a little about trading bull flags (which setup today’s long from 4160 to 4208), then provide the actionable trade plan for tomorrow.