ES Daily Plan | August 7, 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 immediately regained the resistance area from 5245 to 5255, quickly reaching the final upside target of 5285. However, the European session reversed the entire move, leading to the RTH session opening within Monday's value area and weekly support (5215-5245). Yesterday, in both the daily plan and Substack comment section, we discussed how unattractive it was to initiate new shorts due to the distance from value references (5D and 20D VPOC) and the breaks of both the Monthly (5285) and Weekly Extremes (5215). Given these factors, today's price action was not entirely unexpected. Regaining 5255 suggested intraday bullish momentum, ending the daily one-time framing down triggered the anticipated short-covering. This was further supported by the VIX holding below its support level of 35.02 (HOD: 34.77).
The 60-handle squeeze above 5285 filled Monday's true gap at 5331.75, where sellers were waiting. The K-period established an excess high, while the L and M-periods fully traversed today’s value area, resulting in a close within Monday’s range. The key question now is whether sellers will follow through to the downside tomorrow after having the opportunity to reload 100 handles higher, or if the market will display more balanced, two-sided action. Reminder: We are trading a VIX at ~30, cut your trading size.
Buyers managed to end the daily one-time framing down, triggering short-covering that effectively filled the weekly gap at 5331.75. The daily has now returned to a 2-day balance, marked by a notable 200-handle range and excess at both extremes. For buyers, building value within today’s value area is more favorable, while sellers will aim to return within Monday’s value area.
In terms of levels, the Smashlevel is at 5255/5245. Holding above this area signals strength, targeting 5285 and 5305, with a final target at the resistance area from 5323 to 5333 under sustained buying pressure. Failure to hold above 5255/5245 would target 5215 and the top of Monday’s excess low at 5189 under sustained selling pressure.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5255/5245.
Holding above 5255 would target 5285 / 5305 / 5323-5333
Break and hold below 5245 would target 5215 / 5189
Additionally, pay attention to the following VIX levels: 30.64 and 24.78. These levels can provide confirmation of strength or weakness.
Break and hold above 5333 with VIX below 24.78 would confirm strength.
Break and hold below 5189 with VIX above 30.64 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.
Thanks!!
Thank you!