ES Daily Plan | August 9, 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 key focus today was whether Wednesday’s closing weakness would be accepted or rejected, given that Wednesday’s value stayed within Tuesday’s value while price closed back inside Monday’s value area. Today’s session highlighted why value is far more important than price. The overnight session saw a continuation lower early on, tagging the initial downside target of 5189 before finding responsive buyers. Sellers successfully defended Wednesday’s downward spike base at 5231 throughout most of the overnight session, but the release of the jobless claims report triggered a push higher. As a result, the RTH session opened within Wednesday’s value area.
Notice how the market tested and rejected Wednesday’s value area low in the A-period, aligning with our 5265 level marked as “intraday bullish above.” Holding this level signaled strength, indicating that Wednesday’s closing weakness was being rejected. For those with a short bias in RTH, a preferable scenario would involve the market returning to Monday’s value area, ideally dropping below the spike base of 5231. Failure to do so and the upside risk was a rotation back toward the short-term value (5D VPOC) at 5345, as discussed. While we can't predict market movements with certainty, context and levels offer valuable insights into who is in control. For example, "if this level holds," it suggests that buyers are in control, potentially leading to this outcome. Conversely, "if this level fails," it indicates that sellers may regain control, potentially leading to that outcome. Preparation is key to avoiding impulsive decisions and adapting quickly to changes.
The VIX breached its support level of 25.32 during the B-period, while the market was tagging and exceeding the final intraday target of 5301. This suggests that fading the market was not favorable, as there is potential for further strength, which regular readers are already aware of. The 5D VPOC at 5345 was eventually tagged, stalling the upside.
Today’s session formed a double distribution "inside day" within an almost 100-handle range, highlighting the recent increase in volatility. The market closed within the previous week’s range (5331.75), which will be crucial in the short term. A strong market will hold above this level, while today’s highlighted poor structure could act as a downside magnet if it fails to do so.
In terms of levels, the Smashlevel is at 5331. Holding above this level would favor an inside day breakout, targeting 5382 and potentially 5415 under sustained buying pressure. Failure to hold above 5331 would target the lower end of today’s upper distribution at 5308, with a final target at the support area between 5285 and 5275 under sustained selling pressure, effectively filling today’s poor structure.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5331.
Holding above 5331 would target 5356 / 5382 / 5415
Break and hold below 5331 would target 5308 / 5285 / 5275
Additionally, pay attention to the following VIX levels: 26.32 and 21.26. These levels can provide confirmation of strength or weakness.
Break and hold above 5415 with VIX below 21.26 would confirm strength.
Break and hold below 5275 with VIX above 26.32 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.
Brilliant stuff as always!
I like the way you explain stuff - very unbiased