The Next Leg Higher Begins In SPX. How Much Farther Can It Go? Jan 30th Plan

Back on Friday January 12th, ES formally began a new leg higher. Why? Charting 101: From mid December to mid January, we had built a textbook month long bullish inverse head and shoulders pattern. We broke it out explosively at 4830 on January 12th, and its been one way traffic since. This meant very simply, it was “buy dips” from there on out. From last Wednesday until this afternoon, we had been taking a breather after this initial breakout leg - building a base largely between 4900 and 4925 - to reset and recharge for the next leg higher, and we got it today.

I wrote on Friday: “My general lean is always to defer to the trend until I have evidence otherwise. This means as long as we hold that 4905, 4897 support zone Monday, we can base under 4925 then push to 4942+”. We saw *exactly* this today, and we dipped to 4905-4897 at the open last night, held, then rallied back to 4925, spent a few hours there, then continued the push to 4942+.

While its been a fantastic run higher, the real fireworks have yet to begin, because we FOMC Wednesday, NFP Friday, and tons of earnings between. Can bulls keep it going higher? In today’s newsletter I’ll talk this, I’ll then break down recent examples of my two core setups (failed breakdown + backtest). I’ll conclude by providing the actionable trade plan for tomorrow.