As readers know, the theme for the past several months has been buy dips. The dips vary in size, speed, duration, structure, but they all resolve the same: They get bought. **Yesterday, ES saw a sizable dip down to 7586. Bulls bought it. **
**How do bulls buy dips in ES? **As I frequently discuss all major rallies in ES start on Failed Breakdowns, because Failed Breakdowns are how institutions accumulate. Institutions accumulate when ES flushes hard and goes elevator down - losing, and then recovering a big previously set low. In doing so institutions are able to trap shorts that are chasing, use them as liquidity, then price rips the other way when the low recovers. Usually, this process correlated with an external headline shock as institutions love to use headlines for liquidity to trap shorts (or in rare cases, they/insiders are aware of headlines in advance).
We saw this yesterday into today. Yesterday morning we sold elevator down to 7586 low of day. In doing so, ES lost the Wednesday low of day located ~7627. We recovered it early this morning (Failed Breakdown) and went parabolic to 7670+.
I wrote in yesterday’s newsletter: “In summary for tomorrow: ES lost the shelf of of lows from last Tuesday/Wednesday at 7622/27 and we sold off. My general lean is ES can backtest. If ES can recover this we can rip to 7671, 7704, 7745. Bears control until 7622/27 recover.” We saw exactly this after CPI today. ES recovered 7622/27 overnight, and this morning we were off to 7671+.
Is the bottom in? In today’s newsletter I’ll expand on this, I’ll go over today’s Failed Breakdowns (these are key to know), and I’ll discuss the actionable plan for tomorrow.
