The Dip Was Again Bought In SPX. Are New Highs Coming? May 28 Plan
Last week, ES put in its first significant pullback since April 21st, clocking in 4 red days in a row. Despite the fact that it was 4 red in a row though, the selling last week was nonetheless controlled, with sharp - often news driven selloffs - being snapped up within an hour or two. This is a function of the fact that since April 6th, ES has been in what, I’ve called daily a buy dips regime. There has been a strong underlying bid unlike the first few months of the year. Its essential to know the underlying regime of the market so you don’t get caught fighting it, and everyday for nearly two months now, I have it made it clear: Buy those dips.
On Friday, dip buying was put to the test and we saw the deepest flush in a month thanks to a “Tariff Tape Bomb” at 730AM Friday morning and we sold 120 points down to 5760. As readers recall though from the Jan-April bear cycle, there is a law in markets, and my edge exploits it. After every “elevator down” sell in ES, comes an equally violent short squeeze. As a Failed Breakdown long trader, this is how I pay the bills and at 9:35AM Friday, I tweeted that 5788 had to reclaim to start a rally, and we got that squeeze to 5843 high of day.
The dip was again bought. The question for this week was if bulls could maintain that momentum or if Friday’s mornings selloff foreshadowed more selling to come. My lean was that they would. I wrote Friday at 4pm: “In a strong bull case for Monday, ES won’t even head back to support of this range, and will rather just hold 5809 or 5794, recover 5815-20, then head back on up to 5843 then 5850…After 5850 recovers, 5877, 5900, then 5925 are the next big stops on the upside as we work back towards the highs.”
We saw exactly this and right after the newsletter came out Friday, we held 5809, at 6:05PM Sunday, we recovered 5815-20, longs triggered, and we ran up those targets to 5877, 5900, then 5925.+
Its been a great run, but ultimately ES is in a big sideways range since May 13th. Can ES see new highs? In today’s newsletter I’ll talk this, I’ll do a deep dive into the very interesting price action we had on Friday where we saw a deep “elevator down” sell then equally violent “short squeeze”. If ES ever does get back to a bear market, we’ll see this cycle daily and its caused by my two core setup types back to back: My third setup type (the breakdown short), and my primary setup type (the failed breakdown). Finally, I’ll discuss the actionable plan for tomorrow.