ES Daily Plan | August 30, 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
Yesterday, weakness emerged after-hours following the NVDA earnings report. At the opening of the overnight session, sellers attempted a breakdown, coming within 10 handles of the final downside target at 5552. As with any breakout or breakdown scenario, the key focus is on monitoring for continuation (acceptance) or lack thereof (rejection). To keep the breakdown in play, sellers needed to defend the 5572 level or the Smashlevel at 5586. Failure to hold these levels would increase the risk of a rotation back to value, as outlined in the daily plan.
The 5572 level was quickly regained, and the market then consolidated for two hours below the 5586 level. Once 5586 was breached and regained, the odds of further downside continuation significantly decreased, suggesting that any downside bias should be reconsidered. Traders lacking contextual awareness and the ability to adapt to market-generated information will likely continue shorting, stuck in their past biases. This explains why the market's move back to value, and eventually to the other side of the balance, had virtually no pullbacks.
To summarize, when the market broke down in the overnight session, neither I nor the other participants knew whether the breakdown would succeed. We use levels to help us gauge strength and weakness: defending 5572/5586 increased the odds of further downside continuation, while regaining these levels increased the odds of a move back to value. The final upside target of 5646 was tagged in the B-period and exceeded during the C-period. The VIX had already breached its support level of 16.04 before the RTH session, opening the door for additional strength if buyers could hold above 5646. Buyers extended the rally by nearly 20 handles, reaching the multi-day balance high, which is considered a less favorable entry point for new longs. Note how the highlighted poor structure was filled today, which is common during balanced conditions. The closing session saw a liquidation break; however, we remain within the balance area.
The overnight weakness and subsequent breakdown attempt were strongly rejected, leading to a rotation back to value. Consequently, the overall context remains unchanged, with the market continuing to trade within a 9-day balance area where participants are in agreement on value. PCE on deck tomorrow.
In terms of levels, the Smashlevel is at 5610, marking the composite VAL. Holding above this level would target the resistance area from 5646 to 5656. Failure to hold above 5610 would target 5586, with a final target at 5572 under sustained selling pressure. Potential for change lies outside the 5656-5572 range.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5610.
Holding above 5610 would target 5646 / 5656
Break and hold below 5610 would target 5586 / 5572
Additionally, pay attention to the following VIX levels: 16.48 and 14.82. These levels can provide confirmation of strength or weakness.
Break and hold above 5656 with VIX below 14.82 would confirm strength.
Break and hold below 5572 with VIX above 16.48 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.
Interesting work. I have been meaning to explore market profile. I use volume profile in thinkorswim. Market profile is called "Monkey Bars" in thinkorswim. I would love to set up Monkey Bars similar to Smashelito setup to follow and learn. If you or anyone has any info on how I might start on that, I'd owe you one. Thanks.