As readers know, the theme for the past several months has been simple: buy the dips. The dips vary in size, speed, duration, and structure, but they all resolve the same way: they get bought.
How do bulls buy dips in ES? As I frequently discuss, nearly all major rallies in ES begin with Failed Breakdowns because Failed Breakdowns are how institutions accumulate. Institutions tend to accumulate when ES flushes hard and goes elevator down—losing, then recovering, a major previously established low. In doing so, institutions are able to trap shorts that are chasing the move, use them as liquidity, and then drive price sharply in the opposite direction once the low is recovered. This process is often correlated with an external headline shock, as institutions love to use headlines for liquidity to trap shorts. In rarer cases, they—or insiders—may be aware of those headlines in advance.
**We saw this play out overnight, we saw another elevator down dip into Failed Breakdown. ES sold from 7720 down to 7645. **I wrote in Monday’s newsletter: “My general lean is that ES can hold or trap 7662, then push up to 7726, followed by 7750, 7781, and 7800 or so, which is bull flag resistance. Sell if bull flag support fails.” Overnight we trapped below 7662 (which were the Monday lows) down to 7645, recovered, and rallied to 7690’s this morning.
Then - around 11am - ES put in another Failed Breakdown and sold down to 7645 again, flushed it by a couple points, then ripped (Failed Breakdown).
FOMC is tomorrow though. Can ES continue up? In today’s newsletter, I’ll expand on this, review today’s Failed Breakdowns—which are key to understand—and discuss the actionable plan for tomorrow.
