For new followers, the yellow levels highlighted at the bottom are the primary levels that I focus on intraday. My strategy for preventing impulsive decisions at unfavorable locations involves following a simple yet effective rule of exercising caution when initiating trades outside of the yellow levels. This implies that I am cautious chasing longs above the final yellow upside target and shorts below the final yellow downside target. It is crucial to understand that refraining from chasing a trade is not an automatic invitation to initiate a trade in the opposite direction.
Visual Representation
Contextual Analysis
Yesterday after-hours, the market experienced a notable sell-off, breaching the support area between 5088 to 5098 and trapping buyers within the upper distribution from Tuesday’s trend day. In contrast, the overnight session unfolded relatively quietly, primarily forming a distribution within Tuesday’s lower distribution. However, pre-open, another drop occurred, breaching the important 5063-5056 area.
The overnight weakness led the RTH session to open on a significant true gap to the downside, below the final downside target of 5056. Trading under these conditions is always challenging as the market has already covered significant ground. The VIX confirmed weakness by already breaching its resistance level of 16.68 overnight. I had no interest in longs until 5056 was reclaimed, alongside a VIX return below 16.68, while initiating shorts required a market holding below the opening level and overnight low, which held potential for a nasty down day. However, even under these conditions, it's not the most optimal approach to chase shorts contextually. With sellers failing to gain meaningful downside traction below the overnight range, we instead saw a range extension to the upside with change taking place in the E-period, with VIX returning below 16.68. Take note of the pullbacks in the G and H-period, as they offered potential long setups, which made much more sense than initiating longs 30 handles lower. The obvious target was the gap-fill, and you know that you are wrong if the F-period single prints fail to hold. Shorting the 5063-5056 area would be of interest if VIX remained above its resistance. Interestingly, VIX ended up testing its support level of 15.26 (LOD: 15.27).
Yesterday, weakness was observed after-hours, marked by a breach of support and a subsequent downside continuation. Notably, this entire move was completely retraced during the RTH session. Today, the market is showing after-hours strength, characterized by a breach of the 5115-5125 resistance. The immediate focus now shifts to the ability of buyers to maintain above 5125. Upon acceptance above, the target is to fill the poor structure toward the 5145-5155 area. Failure to do so would target a return to today’s highs. Keep in mind that 5125 is the final upside target for tomorrow, highlighting the significant move already made during after-hours trading. PCE tomorrow—stay nimble.
For tomorrow, the Smashlevel (Pivot) is 5091, representing today’s high. Break and hold above 5091 would target the resistance area from 5115 to 5125. Acceptance above 5125 (potential for trend day), would then target the resistance area from 5145 to 5155. Holding below 5091 would target the support area from 5063 to 5056, as well as the 5D VPOC at 5030, in the case of continued weakness.
Levels of Interest
Going into tomorrow's session, I will observe 5091.
Break and hold above 5091 would target 5115 / 5125
Holding below 5091 would target 5063 / 5056 / 5030
Additionally, pay attention to the following VIX levels: 16.02 and 14.72. These levels can provide confirmation of strength or weakness.
Break and hold above 5125 with VIX below 14.72 would confirm strength.
Break and hold below 5030 with VIX above 16.02 would confirm weakness.
Overall, it's important to exercise caution when trading outside of the highlighted yellow levels. A non-cooperative VIX may suggest possible reversals i.e trade setups.
Weekly Plan
Be sure to check out the Weekly Plan, which provides a broader perspective and highlights significant levels of interest to watch in the coming week.
Disclaimer: Futures and options trading involves a high level of risk, with the potential for substantial losses. The information provided in this newsletter is for informational purposes only and is not intended to be a trade recommendation. It is the responsibility of the reader to make their own investment decisions and they should seek the advice of a qualified securities professional before making any investments. The owners/authors of this newsletter are not certified as registered financial professionals or investment advisers.
Crazy session!