Note: This is a resend of the newsletter for Monday October 5th. Originally sent on Friday at 4pm for those who did not receive.
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 yesterday.** 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 Thursday’s low and this Wednesday’s low. Again, this setup another Failed Breakdown. I wrote yesterday 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 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. I wrote yesterday at 3pm: “Generally, ES is rangebound though mostly 7707 to 7768 or so. My lean is always to defer to the trend. This would mean ES can run to 7768, dip, then see 7792, then onto 7822, 7867+.” **We got to work here, hitting 7792+ this morning. **
Will this strength continue nex week? 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.
