ES Daily Plan | February 15, 2024
I will use M-period’s spike base of 5011 as a short-term reference point.
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
The main question ahead of today’s session was whether sellers could sustain the downward momentum by maintaining within the lower distribution of the previous week. There was no interest in retesting the Weekly Extreme Low of 4960, as the market immediately started to push higher during the overnight session. Buyers reclaimed the initial target of 4981, which held during the European session, resulting in an upside continuation and a return within previous week’s upper distribution.
The RTH session opened with a true gap to the upside and saw an immediate inventory correction following a look above the ON high and fail. This is a common fade setup when the market is gapping higher, and it usually becomes more interesting if the market is close to the final intraday upside target. The inventory correction filled the gap and encountered buying activity, coinciding with the FS VWAP. It’s important to keep in mind that when a true gap up is filled, it's crucial to monitor whether acceptance can be established within the prior day's range, indicating a bearish outcome. Failure to do so always leaves the door open for strength later in the session. Buyers typically aim to reclaim two key references following an inventory correction: the open level and the overnight high. Ideally, once these levels are reclaimed, buyers prefer not to see them tested again.
During the late B-period, the overnight high was breached, with the primary target set at the final upside target of 5012. However, buyers only managed to reach 5009 before encountering selling pressure. Subsequently, as the market dipped back below the overnight high and the open level in the C-period, the session entered a challenging phase. The key question was whether sellers could establish acceptance within the prior day’s range. After approximately four hours of intense back-and-forth, buyers emerged victorious, closing out the day with notable strength. Obviously, the VIX essentially holding below its 15.16 support level throughout the session did not help the sellers.
After several hours of intense back-and-forth, during which sellers attempted to establish acceptance within the prior day's range following today's true gap up, buyers ultimately emerged victorious, reaching the 5012 upside magnet. I will use M-period’s spike base of 5011 as a short-term reference point. Holding above, accepting the closing strength, would target the unfilled gap at 5033.25 and a complete traverse of the previous week’s upper distribution. A rejection would open the door for a retest of the 4991-4981 support area, coinciding with the Monthly VWAP.
For tomorrow, the Smashlevel (Pivot) is 5011, representing today’s M-period spike base, coinciding with the short-term value (5D VPOC). Holding above 5011, indicating acceptance, would target the unfilled gap at 5033.25. Acceptance above 5033.25 would target the resistance area from 5044 to the final upside target of 5054, effectively completing a traverse of the previous week’s upper distribution. Break and hold below 5011, indicating rejection, would target the support area from 4991 to final downside target of 4981, coinciding with the Monthly VWAP.
Levels of Interest
Going into tomorrow's session, I will observe 5011.
Holding above 5011 would target 5033 / 5044 / 5054
Break and hold below 5011 would target 4991 / 4981
Additionally, pay attention to the following VIX levels: 15.12 and 13.64. These levels can provide confirmation of strength or weakness.
Break and hold above 5054 with VIX below 13.64 would confirm strength.
Break and hold below 4981 with VIX above 15.12 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.
Thank you! Nailed 5012!
Greetings, thanks for the daily analysis. You often talk about the true gap. What would be your definition of that, does it have to be a certain number of points to consider it a true gap. Thank you