$ES #ES-mini #failed breakdown
I’ve been watching this market for almost 30 years, and it still amazes me how often it behaves in such a simple and brutally efficient way.
Notice the a-b-c up structure, labeled as the -b- up move. As soon as the upside momentum becomes exhausted, the market makes a fast trip lower to reset the game.
Weak retail hands get shaken out. Bears receive an inviting signal to add shorts. This is exactly how a bear trap is formed. Shorts are the fuel that powers market rallies and, especially, breakouts.
When retail traders hesitate to go long near fresh all-time highs, the market needs to lure in bears with a quick drop. That drop creates the supply of future buyers. Once the market turns back up, those shorts are forced to cover, pushing price higher with newly accumulated energy. The power behind this move comes from a simple but extremely effective setup: a false breakdown.
ES-mini Daily chart
Earlier this week the bearish head and shoulders produced a nice impulsive looking drop that undershot the green monthly support 6,856:
ES-mini 60 min chart
That undershot of the monthly support created the bears’ trap and triggered a powerful bullish “failed breakdown” setup.
Bulls feel confident that they have once again successfully played a TACO trade. Another threat of higher tariffs against Europe faded away almost as quickly as it appeared. Every trader brave enough to close their eyes and buy the weakness was quickly rewarded.
From the bullish perspective, the pullback we saw this week is viewed as the -c- subwave of a completed corrective structure: -a- down, -b- up, -c- down. Importantly, this correction produced a higher low relative to the low of wave (iv) from November 2025. That completed -a-b-c- decline provides a solid base for bulls to initiate another leg higher, with price now targeting the Red Target Box.