The War Dip Was Bought in SPX, But Can The Lows Hold? June 16th Plan

Heading into 4pm last night, things were looking great for bulls from a technical standpoint closing at the high of day, however, there is one thing technicals can’t help us with: Telling us when war will break out, and that is what happened at 8pm last night. While technicals can’t help in this regard, they can help in telling where to react with trades after the initial headlines hit and specifically where to get long. Readers know well as Failed Breakdown traders, the types of sharp dips we saw last night are an absolute gift, and result in the strongest squeezes

Some context first: One week ago last Friday, ES broke out a massive multi-week inverse head and shoulders pattern with a 6k “neckline”. The task for bulls this week, was to defend 6k support and until last night, they did. As I’ve said many times before though, its fun to talk patterns. but it ultimately has little to do with what we are all here for: To make money. To do that, we need to focus on execution: Entry setups, trade management. In this regard, readers know I trade one setup: The Failed Breakdown. This setup is foundational to how large institutions accumulate positions, they flush supports/lows, trap shorts, grab liquidity, fill their orders, and price squeezes. When it comes to the large inverse H&S pattern with 6k neckline, we saw this week a marriage between a macro chart pattern and execution. All week, we have flushed 6k, trapped, squeezed. Over and over.

We saw this yesterday. I wrote on Wednesday at 4pm (when we were 6020s) that: “One possible trade would be if we could test 5987 then put in a Failed Breakdown of the 5992 Tuesday daily low.” What did we see yesterday? Exactly this. We sold to 5987 precise low of day, trapped shorts beneath the 5992 Tuesday low, and longs triggered yesterday morning. Where was I looking for on this move? I also wrote Wednesday at 4pm: “My lean is we work up to 6047 again.” By 11am yesterday, we got to 6047 then spent the rest of the day basing below.

Then, at 8pm, ES got rug pulled by news that Israel had attacked Iran. I wrote at 4pm yesterday: “There is some geopolitical headline risk this weekend so as always, I never hold full positions over the weekend.” This was in preparation for the weekend, but headlines broke out earlier, and ES flushed below 6k down to 5925. Readers recall from Feb-April high volatility window though that after every “elevator down” sell comes a short squeeze, caused by my core setup (the Failed Breakdown). At 10:45PM last night, we got this. I wrote back on Tuesday at 4pm: “5940 and 5926 are spots of interest below there and I especially like the Failed Breakdown of last Thursdays 5929 low especially if we tag 5926 first.” Last night, we tagged 5927, recovered last Thursday’s 5929 low, and longs triggered for a 100+ point leg up to 6029, before dipping again.

Bulls managed to hold the lows, but can they defend next week? In today’s newsletter I’ll talk this, I’ll do a deep dive into a few powerful Failed Breakdowns we had this week, including the monster Failed Breakdown last night that took us +100 points from 5926 to 6029. This is all I trade. Finally, I’ll discuss the actionable plan for Monday.