ES Daily Plan | April 5, 2024
The obvious question now is whether this was merely a liquidation break that will attract dip buyers, or if a deeper correction is underway. NFP report on deck tomorrow.
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
Today's session unfolded as quite significant. Overnight, the market demonstrated strength by maintaining within last week's range and breaking out of yesterday's main distribution. The upside targets were 5282, 5294 and 5313, and the overnight session came close to clearing all of them, reaching an overnight high of 5306.
The RTH session opened with a large true gap to the upside, 25 handles above Wednesday’s high. As always, if there is an early inability to break and sustain a move above the ON high, it can create opportunities to fade the market, targeting an inventory correction. The fade setup was particularly interesting today, as the market was near the final upside target of 5313. A quick look above the ONH and fail prompted an inventory correction. Keep in mind that this setup is a trade, not an investment. This awareness implies understanding that it's likely an inventory correction rather than a result of stronger sellers. The more conservative trader is not participating in the fade but patiently waiting for long setups following the correction. The pullback found support at the FS VWAP. As usual, for upside continuation when gapping higher, the market needs to reclaim both the ONH and the opening level to signal strength. Today’s session served as a great example of how crucial the intraday targets are. Apart from the initial pullback, there was minimal attractiveness for initiating longs, despite the context being bullish. In these scenarios, either wait for the market to accept above 5313 (with VIX confirmation), potentially signaling a trend day, or you simply play defense. It’s so easy getting emotional when the overnight session has ripped higher without your participation. Use the levels as your guidance.
The afternoon session witnessed a nasty liquidation, clearing all weekly downside targets, breaking the previous week’s low and the FOMC breakout point in the process. Avoiding chasing longs near 5313 wouldn't necessarily have positioned you to catch the sudden short move, but it would have helped prevent being caught on the wrong side, which is the important part. The session closed below the Weekly Extreme Low of 5215, which is not an optimal location to chase shorts, making tomorrow's session tricky. Adding to the complexity, we have the NFP report. I’m personally playing defense, and I’m very interested in where we will close out the week.
While the AM session was calm and collected, the afternoon session saw a nasty liquidation, clearing all weekly downside targets, breaking the previous week’s low and the FOMC breakout point in the process. The obvious question now is whether this was merely a liquidation break that will attract dip buyers, or if a deeper correction is underway. As always, I rely on levels to assess the market's strength or weakness. The weakest response would involve maintaining below the 5204-5215 area, favoring a downside continuation, targeting the weekly NVPOC at 5155. Failure to do so would open the door for fills of today’s structure toward the 5237-5247 area—a crucial inflection point in the short-term. Conversely, the strongest response would see acceptance above 5247, ideally within the previous week’s range above 5263. With the NFP report on deck tomorrow, it's not a bad idea to play defense.
For tomorrow, the Smashlevel (Pivot) is 5204, representing the M-period spike base. Break and hold above 5204 would target the Weekly Extreme Low of 5215. Acceptance above 5215 would target fills of the poor structure toward the resistance area from 5237 to the final upside target of 5247—a crucial inflection point in the short-term. Holding below 5204, signaling continued weakness, would target a downside continuation toward 5173, as well the final downside target of 5155, representing a weekly NVPOC.
Levels of Interest
Going into tomorrow's session, I will observe 5204.
Break and hold above 5204 would target 5215 / 5237 / 5247
Holding below 5204 would target 5173 / 5155
Additionally, pay attention to the following VIX levels: 17.02 and 15.68. These levels can provide confirmation of strength or weakness.
Break and hold above 5247 with VIX below 15.68 would confirm strength.
Break and hold below 5155 with VIX above 17.02 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.
Deltas keep going down but price exploding up!
Thank you buddy! Had longs and shorts but exited early.