ES Daily Plan | August 8, 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 quickly retraced Tuesday’s weakness observed in the last three periods (K, L, and M) after rejecting Monday's value area. The European session reached the resistance area from 5323 to the final intraday upside target of 5333, temporarily stalling the upside momentum. There was significant buying effort within this resistance area, as noted in the pre-open post on X (Link). Despite the poor location to initiate longs (within resistance), these buyers got paid during the initial squeeze in the RTH session. Also mentioned in the post, a strong market would break and hold above this resistance, while failure to do so would open the door for a traverse of Tuesday’s value and range.
The initial four periods appeared promising for buyers, as they held above resistance, established higher value, and saw the VIX stay below support. However, they failed to extend the initial balance. When the E-period broke lower, things escalated quickly, opening the door for a traversal of yesterday's value and range. This highlights the importance of staying adaptable and open-minded. Levels and areas on the chart are essential for assessing how market participants are achieving their objectives and for guiding necessary adjustments. Buyers initially performed well, which supported the long side, but with the breakdown in the E-period and the subsequent rejection in the F-period, the situation changed. Therefore, it's crucial to adjust your approach accordingly. Tuesday’s range was almost perfectly traversed.
The short-term value (5D VPOC) has shifted lower from 5560 to 5345. The key observation now is whether sellers will manage to push it further down toward Monday’s value area, or if the market will begin to rotate back toward 5345. Two daily lows now within the weekly support area, will it hold? A VIX 30+ supports a break of 5215.
What initially looked promising for buyers ended in failure, resulting in a complete traversal of Tuesday’s range. Buyers would favor an immediate return to today's value area to reject the closing weakness, while sellers, who managed to close back within Monday’s value area, are aiming to negate its excess low for a downside continuation.
In terms of levels, the Smashlevel is at 5231, marking the closing spike base. Holding below this level signals weakness, targeting the top of Monday’s excess low at 5189 (in process), with a final target at the 10% correction level of 5149 under sustained selling pressure. Failure to hold below 5231 would open the door for filling today’s sets of single prints at 5265 and 5301.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5231.
Break and hold above 5231 would target 5265 / 5285 / 5301
Holding below 5231 would target 5215 / 5189 / 5149
Additionally, pay attention to the following VIX levels: 30.40 and 25.32. These levels can provide confirmation of strength or weakness.
Break and hold above 5301 with VIX below 25.32 would confirm strength.
Break and hold below 5149 with VIX above 30.40 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.
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