Visual Representation
For new followers, the yellow levels highlighted at the bottom 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.
Contextual Analysis
On Friday, the market established a double distribution trend day to the upside with one set of single prints, breaking out from the prior multi-day balance area and shifting the daily time frame to one-time framing up. As is typical with any breakout scenario, the primary focus is to closely monitor for continuation (Acceptance) or lack thereof (Rejection).
I'll be using the low volume area (LVA) from 4593 to 4585 as a short-term reference to gauge the market's strength or weakness. Buyers aim to maintain above this area, targeting an upside continuation towards 4615 and the year-to-date high at 4633.50. Conversely, sellers aim to negate Friday’s trend day by establishing acceptance within the Friday’s lower distribution, targeting a return to value.
On the composite volume profile to the far right, we can clearly observe the main distribution, which I have highlighted in blue. It’s all about whether there will be initiative buying above this area or not. The absence of such initiative may draw in responsive sellers for a potential “look above and fail.”
For tomorrow, the Smashlevel (Pivot) is 4593, which represents the lower end of Friday’s upper distribution. Holding above 4593, indicating acceptance, would target an upside continuation towards 4615, as well as the final upside target of 4633.50, representing the year-to-date high and 5-month balance high. Break and hold below 4593 would target fills of structure towards 4585. Break and hold below 4585 would target the final downside target of 4569, which essentially is a return to value.
Levels of Interest
Going into tomorrow's session, I will observe 4593.
Holding above 4593 would target 4615 / 4633
Break and hold below 4593 would target 4585 / 4569
Additionally, pay attention to the following VIX levels: 13.22 and 12.04. These levels can provide confirmation of strength or weakness.
Break and hold above 4633 with VIX below 12.04 would confirm strength.
Break and hold below 4569 with VIX above 13.22 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
Be sure to check out the Weekly Plan, which provides a broader perspective and highlights significant levels of interest to watch in the coming 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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