ES Daily Plan | August 27, 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 was relatively quiet, with trading activity consolidating at the upper end of the multi-day balance area. Consolidation near a balance extreme often suggests that a breakout attempt could be in play. In the European session, a poor high was formed just below the previous week’s high, which also marked the balance high.
Given the overnight context and the RTH session opening at the upper end of the multi-day balance area, the key question was not whether a breakout would occur, but whether it would be accepted or rejected once it did. The A-period quickly breached the poor overnight high and the multi-day balance high, sweeping liquidity and triggering stops. However, the market quickly retraced into the balance area, marking the start of a more interesting phase from an order flow perspective. There was notable aggressive buying activity taking place without driving the price higher, indicating absorption—market buyers lacked the size to overcome the passive limit orders. Observing how aggressive buyers struggled after looking above the multi-day balance caught my attention, given that breakouts that lack continuation often set the stage for significant moves in the opposite direction, in line with general balance guidelines. During the B-period, aggressive sellers immediately gained traction, forming single prints that remained unfilled. After tagging the initial downside target at 5633, the market saw two-sided activity, ultimately forming a b-shaped profile.
I will continue to interpret the daily as balance. Note that both the 5D VPOC (short-term value) and 20D VPOC (medium-term value) are now situated within this multi-day balance area, confirming the current state of balance.
After a textbook “look above and fail” of the current multi-day balance area, responsive activity quickly brought the market back to value. The key question now is whether sellers can test the opposite side following today’s double distribution profile. The overall outlook remains unchanged, with the market continuing in a state of balance as it awaits further market-generated information to guide its next move.
Responsive activity is expected within this 6-day balance, while a more decisive directional move would require acceptance outside its extremes. The general guideline suggests going with the break of the multi-day balance area and monitoring for continuation (acceptance) or lack thereof (rejection). If there is a lack of continuation following a breakout attempt, it can trigger moves in the opposite direction.
In terms of levels, the Smashlevel is at 5646, marking today’s afternoon rally high. Holding below this level would target the multi-day value support at 5613, with a final target at 5586 under sustained selling pressure. Failure to hold below 5646 would open the door for filling today’s poor structure, targeting 5661, with a final target at 5676 under sustained buying pressure.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5646.
Break and hold above 5646 would target 5661 / 5676
Holding below 5646 would target 5613 / 5586
Additionally, pay attention to the following VIX levels: 17.02 and 15.28. These levels can provide confirmation of strength or weakness.
Break and hold above 5676 with VIX below 15.28 would confirm strength.
Break and hold below 5586 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
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! Great stuff!