ES Daily Plan | April 4, 2024
The previous week’s low of 5263 remains a crucial inflection point after today’s session that saw a short-covering rally, which failed to fill yesterday’s gap at 5282.25, forming a poor high.
Visual Representation
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.
Contextual Analysis
During the overnight session, market participants focused on two key references: the Smashlevel at 5257 and the FOMC breakout point at 5247. Tuesday's closing move was promptly rejected in the Asian session, and buyers' attempt to reclaim the 5257 level during the European session was swiftly negated. Nevertheless, the downside was stalled by the 5247 level, a level discussed in both the daily and weekly plans, where buyers maintain control above it, while potential trouble would kick in with acceptance below.
The RTH session opened with a test of 5247 to the tick, quickly leading to a test of the 5257 level, where price stalled momentarily. The B-period exploded to the upside (ISM), leaving a large set of single prints behind, as the C-period saw a range extension above the initial balance high, attempting to fill yesterday’s gap. It’s not uncommon for the market to have difficulties sustaining range extensions when the initial balance is very large, which was the case today. The gap remained unfilled, and a poor high formed in the D/E-period, indicating caution in chasing the market as buyers are getting crowded. The patient buyer waits for an afternoon pullback to join a potential upside continuation. This setup was particularly interesting today as both the ON high and IB high were breached, accompanied by single prints and higher value. The drop in the G-period was picked up by buyers at the full session VWAP, coinciding with the halfback and the low of the inside week, presenting an opportunity. When an afternoon pullback finds buyers, they expect to witness an immediate upside continuation. Failure to make a new intraday high signals caution. Another poor high in the I/J-period was not optimal. The last hour was challenging as the market saw a nasty liquidation break that retested the opening level; however, the 5247 remained intact. VIX HOD 15.18 (15.20 outlined as resistance).
The previous week’s low of 5263 remains a crucial inflection point after today’s session that saw a short-covering rally, which failed to fill yesterday’s gap at 5282.25, forming a poor high. Notably, 5263 essentially marks the lower end of today’s main distribution. Maintaining above 5263 would indicate a potential continuation pattern to the upside, consistent with the market's behavior this year whenever it has gapped lower and probed below the prior week’s low. Sellers aim to break this pattern by establishing value below 5263, preferably negating the FOMC breakout at 5247.
For tomorrow, the Smashlevel (Pivot) is 5263, representing previous week’s low. Holding above 5263, signaling strength, would target the unfilled daily gap at 5282.25. Acceptance above 5282.25, would target 5294, as well as the final upside target of 5313. Break and hold below 5263, unlocks potential weakness, targeting the FOMC breakout point at 5247. Acceptance below 5247 would target the support area from 5225 to 5215.
Levels of Interest
Going into tomorrow's session, I will observe 5263.
Holding above 5263 would target 5282 / 5294 / 5313
Break and hold below 5263 would target 5247 / 5225 / 5215
Additionally, pay attention to the following VIX levels: 14.98 and 13.66. These levels can provide confirmation of strength or weakness.
Break and hold above 5313 with VIX below 13.66 would confirm strength.
Break and hold below 5215 with VIX above 14.98 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.
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