We Have Built A New Pattern In SPX. What Way Will It Break? Feb 7 Plan

Last week concluded with a 130 point, vertical squeeze higher. This was the latest leg of the inverse head and shoulders breakout rally that began on January 19th, triggering what I’ve since called a “buy all dips market”. 90% of successful trading is just getting the trend right, and not fighting it - and the clear breakout on January 19th has made this job very easy. After this 130 point rally to end last week though, how did this week start? As expected, and as always, it started with consolidation. Remember technical analysis: After trend, comes consolidation and pattern formation, which sets up more trend.

I re-affirmed this yesterday, writing: “I am still holding my 10% long runner from 4945 described above, all risk free now. Like the last two Monday’s in row (a little Deja Vu here) we are now in the process of building another messy base after three days of trend. This type of action deeply punishes those who are not trading level to level.” I added “Until then, my loose lean for tomorrow is we can defend 4947 lowest, reclaim 4965, then fill out the range back to 4977, to 4990”. Today, we got to 4777 high of day, then continued to chop around, building yet another chart pattern.

We are once again coiling up in ES, for another move. What way will it break, and what is the pattern? In today’s newsletter I’ll talk this, I’ll then discuss yesterdays session as in the span of one day, we saw, all three of my core setups in one session. This was rare, and a good opportunity to see all three in action. Finally, I’ll discuss the trade plan for tomorrow.