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. Friday, ES was tested with a big one (135 points).
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 this week and as stated above, on Friday ES sold 135 points rapidly down to 7676 low of day Friday. **After a flush like this, we always get a squeeze on a Failed Breakdown. I wrote on Friday at 4pm: “**My general lean is ES can try again to backtest 7835. 7718 must recover to get started then we can rally to 7755/65, dip, then head to 7803, 7835.” We recovered Thursday’s 7718 low on Sunday evening to trigger a Failed Breakdown, then yesterday we continued this push higher to 7803 or so, but ES was unable to get to 7835 before selling into this morning.
**If you look at the chart though, ES has been rangebound for the last week or so now. Generally resistance is 7803 and support is 7707 or so. We sell down the range, Failed Breakdown, rip up it, rinse and repeat. This is a tight coil. **
**Today, we probed below this range again. **
Will ES recover it tomorrow? 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.
