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. After a 400+ point rally in early August (which we were onboard for) ES began its first slow, controlled dip over the last couple weeks. Since mid this week, bulls have been trying to buy it as always, constructing a shelf of lows around 7659. Today, we probed below this shelf
**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 last Monday one week ago (August 24th). I wrote last Monday at 3pm: “ES spent since Thursday basing out at 7659 or so. My general lean is ES can hold this (or quick trap below) then recoveries of 7680 target 7698, 7716-20, 7746, then 7794-97.” 7659 was the Thursday August 20th low of day. We swept it slightly last Monday (Failed Breakdown), recovered, then held it all week, setting the stage for upside taking us to 7780s last week high and then we dipped into today. All rallies start with a Failed Breakdown like this.
Ultimately though, ES had been rangebound for the last 2 week with 7659 support which is a major shelf of lows and resistance largely at 7744. Today, we swept it, and recovered, triggering a Failed Breakdown. I wrote yesterday at 4pm**: “7659 is below there which has been range support**. This was the low of day Thursday August 20th. We swept it by a couple points last Monday (setting a new low a few points lower), and rallied, then 7659 defended since. Failed Breakdowns of this shelf at 7659 actionable and ideal would be if we could tag 7649 or 37 in the process.” We saw this today, dipping to 7634, recovering 7659, and rallying before closing the day below 7659.
**Will today’s dip get bought and can bulls get above 7659? **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.
