The Range In SPX Is Tightening - A Big Move Incoming. What Way? September 14th Plan

For those new to trading CPI days, today was a great example of how they look. I wrote yesterday that the defining feature of CPI days are traps, writing: “These days are characterized by traps. Frequently, the first move after the release (and often, the second and third) end up fading. It is for this reason that failed breakdowns are your best friend”. What did we see today? Precisely this.

Immediately after the data release, we spiked lower (the initial trap), then put in a good 30+ point rally. I was prepared for this setup and wrote yesterday: “4503-4497 is the first major support down…. After CPI I’d want to see a flush and recovery to get long (or even test 96 then pop above 4503 to buy)”. This is exactly what we saw and after CPI we dipped to that 4503-4497 zone and longs were triggered with 30 points of followed through. Late day (as is usually the case on CPI days) it reversed. As a failed breakdown trader, my goal is rather than being liquidity for institutions and getting caught in traps (which is what happens to retail traders), to trade the traps alongside the institutions.

Despite all this though today was plenty of volatility to go “nowhere” and we are ultimately in the same 4500-4540 range that we have spent the entirety of September in. This is a base, and it will produce a large trend move. Which way though? In today, I’ll provide some insight on this, then talk some details behind my core setup (the failed breakdown). Finally, I’ll be talking the actionable trade plan for tomorrow.