Yesterday SPX Broke Out Its 2 Week Range. All Time Highs Next, Or Pullback? June 26th

The past week has been a masterclass in how simple technical patterns can help navigate a volatile headline environment. While we can never predict when the next big Middle East or Tariff tape bomb will hit the market, technicals can tell us: 1) Where to engage after 2) How to engage after and 3) The broad pattern (which gives us a lean on where price is likely to go). The last week was a powerful demonstration of all this.

For the last 2 weeks, ES had been building out a massive bullish descending triangle pattern, something I discussed every day last week. 5978 was support (we set big lows here on June 5th, June 12th, then put in 10 point Failed Breakdowns on June 19th and this Sunday), with resistance being up at 6081 (declining trendline connecting the June 11th and June 16h lower highs). As I discussed last week though, patterns are fun, but can’t tell us how to enter. To do that, we need a setup, and for me, its always the Failed Breakdown. Where do Failed Breakdowns most often occur? At supports of ranges, and heading into last weekend, 5978-82 was the mother of all supports. We just needed a headline to get us there (we closed last Friday at 6020), and we got it over the weekend with the US attacking Iran.

Readers were very well prepared for this. I wrote on Friday at 4pm: “My general lean is always to defer to the trend, until it ends. 5978-82 to 6081= a range (descending triangle) with 6050 a key magnet inside. My lean is we work back up to 6050, then 6081. Above there, we can try breakout to 6099, 6124, 6143.” I also wrote on Friday at 4pm: “…Wait for a Failed Breakdown of Thursdays 5970 low. Perhaps down to 5964 and back up.”

We saw literally exactly this. At 6pm Sunday, we saw a marriage of all the above concepts: US striking Iran over the weekend lead to a bearish gap down. This took us to triangle support. We then flushed Thursday’s 5970 low, trapped shorts, recovered, and longs were triggered for what ended up being a 175 point move. By yesterday morning, we tagged 6143 target.

Breakouts are all well and good, but afterwards, they need to be defended, and that was the key task for bulls today. ES spent all day today in nearly no volatility chop. I wrote yesterday: “6140 is first support down. Not much of a level, but we might hold it in a completely parabolic situation. I’d prefer to see it flush and recover to long but read the action there.” We spent all day today at this level, testing it last evening after the newsletter, rallied to 6160, tested it at 11:30AM today, flushed it once at 1:40PM, then held above all afternoon.

We are now consolidating and resting after the breakout. Is another leg up incoming? In today’s newsletter I’ll talk this, I’ll do a deep dive into my trailing stop methodology, and specifically, how I was able to hold longs from Sunday into yesterday. My real edge is in my trade management, not my entries. Finally, I’ll discuss the actionable trade plan for tomorrow.