Will Today's Dip Get Bought In SPX, As Usual? March 5 plan

After three days of brutal chop last week, we were finally rewarded with a major breakout day on Friday. While Friday did not quite match the historic rally we had a week prior on February 22nd (which was the largest green day since Nov 2022), Friday was nonetheless one of the larger green days this year. As readers recall, I was long since Thursday 5060s in preparation for this. What caused this squeeze? The same thing that causes all large moves. ES broke out a clean chart pattern (bull flag), that we spent 3 days building last week.

I affirmed this on Thursday before the rally, by writing: “ES is flagging - as long as 5078-80 lowest holds on dips, we can test 5120-24, then begin working up the levels to new all time highs”. We got to new all time highs on cue on Friday. For the past 5-6 weeks in a row though, ES has been locked in a highly predictable cycle. As discussed extensively, this cycle has been parabolic melt-up Thursday/Friday, then pullback on Monday and Tuesday. I re-affirmed this yesterday by writing: “This has lead to the Monday-Tuesday “hangover” effect we have seen recently. This often means messy, trappy, poor quality no follow through chop; or just direct pullback” and we saw exactly this today, chopping until 2pm, before a late day pop-and-drop to close at the lows.

Are we going to see the same as last week? In today’s newsletter I’ll talk this, I’ll finish my ongoing series on failed breakdowns (my core setup. Recall that everyday nearly last week we had one, and the nearly 100 point melt-up we concluded last week originated with one, which originally got me long). I’ll conclude by discussing the actionable trade plan for tomorrow.