ES Daily Plan | August 14, 2024
My preparations and expectations for the upcoming session.
For new followers: The yellow levels highlighted at the bottom left of the chart 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
The overnight session grinded higher during the Asian hours and explored prices above Monday’s high when the European session opened. This move was retraced before the release of the PPI data. After the release, the market pushed higher, once again exploring prices above Monday’s high, and leading the RTH session to open with a true gap up.
When the market opens with a true gap, in either direction, it signals a shift in tone relative to the previous session. While Monday’s session struggled to gain traction above the crucial 5385 level, today’s gap above it marked a significant effort by buyers to change the market’s tone. Our job today was to monitor whether this move would be accepted or rejected. Failing to fill the gap or only partially filling it is a sign of strength, setting up potential long opportunities. If the gap fills completely, we’ll need to see if the market accepts back within the prior day’s range, indicating a bearish outcome.
The market immediately breached the overnight high (5409.14), which is typically the most bullish outcome when gapping higher. However, after reaching the final upside target of 5415, the upside momentum temporarily stalled. When gapping higher, the ONH and the opening level are two crucial references. Although sellers managed to push below the ONH, the opening level held firm in the C-period, coinciding with the full session VWAP. Note the poor low formed in the C-period against the A-period. The failure to fill the gap, combined with a poor low, indicated weak sellers, suggesting that after three periods of RTH trading, the market showed no signs of weakness. Today's outlier upside target, the 5435-5445 area, was reached already in the F-period. However, chasing this move was tricky unless you entered the market early, ideally around the full session VWAP. The key was not to fight against it, given the market’s indication of the relatively weak state of the sellers.
Buyers managed to fill the gap at 5444.75 and close the session back within the previous month’s range, following today's gap higher, which remains unfilled (5396.75). This gap now serves as a key downside reference. Six consecutive sessions have marked higher lows since tagging the 10% correction level at 5149—a pattern sellers need to break. CPI on deck tomorrow.
In terms of levels, the Smashlevel is at 5456, marking today’s spike base. Holding above this level signals strength, targeting 5480, with a final target at the resistance area between 5505 and 5515 under sustained buying pressure. Failure to hold above 5456 would target 5435, with a final target at 5413 under sustained selling pressure.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5456.
Holding above 5456 would target 5480 / 5505 / 5515 / (5530)
Break and hold below 5456 would target 5435 / 5413 / (5397-5387)
Additionally, pay attention to the following VIX levels: 19.44 and 16.76. These levels can provide confirmation of strength or weakness.
Break and hold above 5515 with VIX below 16.76 would confirm strength.
Break and hold below 5413 with VIX above 19.44 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
Make sure to review the Weekly Plan, which provides a broader perspective and highlights key levels of interest to observe in the upcoming week.
Thank you!
Thanks!