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.
This is what we saw last Thursday.** We went elevator down from 7770’s to 7681-74 by 10am. In doing so, ES lost a big shelf of lows at 7707 comprising last Wednesday’s low of day and the Thursday priors low of day. Again, this setup another Failed Breakdown. I wrote Wednesday in the newsletter: “Nothing below there until the Failed Breakdown of last Thursday’s 7707 daily low.”**
We recovered it, and ripped. ES had been doing this all last week: Elevator down to the low 7700’s or lower, sweep a major low, trap bears, recover. Readers know this is what institutional accumulation looks like. From here, the job for bulls was to run it and we ripped Friday to 7800+. Yesterday, I was looking for more. I wrote on Friday at 4pm: “** My general lean is always to defer to the trend. As long as 7768 holds we can continue up direct to 7823 (perhaps dip there), then head to 7846, then 7867. Likely dip there.”**
T**his played out to perfection this week. **Today, we ran to 7867, and beyond. The question I asked in yesterday’s newsletter was: “Are All Time Highs Coming For SPX?”. My lean was yes, stating: “My general lean is -as always - to defer to the trend. This means as long as 7768/82 continues to defend, we continue up to 7845, react, 7867, react, then push to all time highs.” We pushed that way today getting to 7895 to roughly re-test the prior all time high.
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.
