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. Today ES was tested with a massive dip.
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 today after FOMC. ES went elevator down from the ~7700 post-FOMC high down to 7642. In doing so, ES lost the shelf of lows comprising yesterday’s low of day at 7643-45. I wrote in yesterday’s newsletter: “Below 7662 is 7643-45 which was a massive low set at 4am today and again at 11am today or so. The Failed Breakdown of this zone is actionable.” **We triggered this about 5-10mins after FOMC, recovered 7643-45, and ripped 40+ points.
ES then went elevator down again into 3pm. What caused the elevator down sell? As readers know, rallies/squeezes in ES are caused by Failed Breakdowns, but **sells are caused when a well defended/previously tested shelf of lows (ideally that has already seen a Failed Breakdown, fails. This is what we had at 7643-45 and its failure today would trigger a flush. **I wrote in yesterday’s newsletter: “Bear case tomorrow: Begins below 7643 now…. For the 7643 short, ideally price can put in one final bounce here, OR a Failed Breakdown, and then one can short beneath the lows of that bounce at 7635 or so.” We hit the 7635 trigger, and down we went.
Will bulls buy the post-FOMC dip? 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.
