ES Daily Plan | August 2, 2024
My preparations and expectations for the upcoming session.
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
The main focus today was on whether Wednesday’s breakout would be accepted or rejected. Signs of acceptance would include higher or unchanged value relative to Wednesday’s session, while a drop back below 5530 would put the breakout into question. On the chart, I noted that the rally was initiated from a poor low, often indicative of short-covering. While this doesn't necessarily rule out further upside potential, it suggests less confidence in the rally compared to one initiated from an excess low. Given this context, it became even more crucial to monitor the breakout for continuation or lack of. Any signs of rejection would suggest a lack of stronger buying interest and increase the likelihood of the poor low being revisited.
There were no signs of rejection during the overnight session, as trading remained within the upper end of Wednesday’s range. However, the RTH session told a different story. Buyers managed to fill the gap at 5594.50, but the upside momentum ended thereafter. For those who reviewed the Weekly Plan, the weekly resistance is marked between 5595 and 5625, today’s HOD: 5600.75. Despite today’s 156-handle range, there’s little to analyze. The Smashlevel at 5549 (initial balance low) failed to hold, resulting in a quick test of the support area from 5530 to 5520. Additionally, the VIX breached its 17.24 resistance before this support test, which was a concern for buyers as the market was retesting a crucial area. Holding below 5520 was marked as intraday bearish, as it would effectively negate the breakout. If there is a lack of continuation following a breakout attempt, the general target, according to balance guidelines, is a rotation back toward the middle and the opposite side of the balance area. Completing a full traverse of the balance range in a single session was highly unexpected and underscores today’s remarkable range.
Wednesday’s breakout proved to be an opportunity for stronger sellers to step in, as the breakout was negated and triggered a move to the opposite side of the balance area. An outside day was established, marked by four sets of single prints within a remarkable 156-handle range. Similar questions arise today as they did after Tuesday’s session: Will sellers attempt a breakdown, or will the market rotate back toward 5530? NFP tomorrow.
In terms of levels, the Smashlevel is at 5480. Holding below this level signals continued weakness, targeting the support area from 5445 to 5435, with a final target at 5410 under sustained selling pressure. Failure to hold below 5480 would open the door for a rotation back toward the resistance area from 5520 to 5530.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5480.
Break and hold above 5480 would target 5505 / 5520 / 5530
Holding below 5480 would target 5445 / 5435 / 5410
Additionally, pay attention to the following VIX levels: 19.52 and 17.66. These levels can provide confirmation of strength or weakness.
Break and hold above 5530 with VIX below 17.66 would confirm strength.
Break and hold below 5410 with VIX above 19.52 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.
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.
The VIX exploded and gave me confidence. Sell at VWAP, buy at MA100