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
During the overnight session, trading was mostly quiet and took place within yesterday’s spike area until the CPI data was released. This release established a CPI range between 5474 and 5448 and led to another RTH session opening with a true gap higher. In contrast to Tuesday gap, sellers managed to fill the gap and stay within Tuesday’s range throughout the initial trading periods. The aggressive selling effort, particularly during the initial balance (first hour of RTH), was highly significant. Check the delta profile on the chart below the 5456 level (highlighted).
Given the failed gap higher coupled with this kind of selling effort, we would have expected a more significant drop, at least a test of Tuesday’s afternoon pullback low around the 5435 level. The lack of downside pace was a sign of caution, as passive buyers were absorbing the aggressive sellers. When the B-period rejected Tuesday’s spike base at 5456, sellers initially gained increased downside pace during the C-period. However, this attempt was rejected, leading to a quick return within the initial balance range and triggering a sharp squeeze when back above 5456. This move was clearly driven by the failure of sellers, despite their significant efforts, to sustain downside momentum.
Generally, when aggressive activity against the short-term trend fails to move the price despite increased size, it signals caution. The larger the effort that fails, the more pronounced the potential squeeze. The squeeze resulted in tagging the initial upside target of 5480, which was marked as “intraday bullish above.” A failure to hold above this level triggered an afternoon pullback. Buyers stepped in precisely at the 5456 level in the G-period, but no new highs were established thereafter.
Despite the significant aggressive selling activity within Tuesday’s range, passive buyers were able to absorb the effort, allowing the daily upside imbalance to continue. If buyers can maintain within the previous month's range (5432.50), the primary upside magnet is the final weekly target at 5530, which marks a high volume node. Meanwhile, the main objective for sellers remains unchanged: to end the daily one-time framing up.
In terms of levels, the Smashlevel is at 5482. Holding below this level signals an imbalance slowdown, targeting the afternoon pullback low at 5456—Tuesday’s spike base—with a final target at 5435 under sustained selling pressure. Failure to hold below 5482 maintains the daily upside imbalance, targeting the resistance area between 5505 and 5515, with a final target at 5530 under sustained buying pressure.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5482.
Break and hold above 5482 would target 5505 / 5515 / 5530
Holding below 5482 would target 5456 / 5435
Additionally, pay attention to the following VIX levels: 17.24 and 15.14. These levels can provide confirmation of strength or weakness.
Break and hold above 5530 with VIX below 15.14 would confirm strength.
Break and hold below 5435 with VIX above 17.24 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.
Thanks as always!