ES Daily Plan | February 21, 2024
Today's true gap down remained unfilled (5012.75), allowing sellers to dictate the majority of the session. I'm using the 4995 level 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
I've received numerous messages requesting an explanation of the footprint chart shared on Friday, which illustrated the failure above 5048.50. I've included an explanation below that's worth checking out, especially for those who may be unfamiliar with footprint charts.
Monday’s holiday session is excluded from the chart. During the overnight session, buyers were unable to reclaim the Smashlevel of 5032, opening the door for sellers to attack the 5011 level, which they managed to break during the Asian hours. Did you observe how sellers defended the 5011 level, presenting opportunities later during the European session?
The RTH session opened with a true gap to the downside following the overnight weakness. The immediate inventory correction that unfolded quickly found sellers around the overnight halfback, ultimately leaving the gap unfilled. Sellers swiftly took control of the opening level and breached the overnight low, both significant references when the market opens with a true gap down. It’s worth noting that the VIX remained above its resistance level of 14.84 throughout the session. In such scenarios, the final downside target (4981 today), may act as a downside magnet. Obviously, the probability of reaching 4981 significantly increased upon taking control of the opening level and overnight low following the true gap down. By the C-period, 4981 had already been reached (4982), sparking some buying activity that resulted in partial fills of the A-period excess. However, this bounce was short-lived as sellers were reloading. The next downside leg breached 4981, and with VIX confirming weakness, I’m generally not in a hurry to look for reversals, as there is potential for further weakness. The market saw an additional drop of 13 handles, but buyers managed to close the session back within today’s value area.
Today's true gap down remained unfilled (5012.75), allowing sellers to dictate the majority of the session. Take note of the short-term volume profile highlighted in blue, which forms a double distribution with a notable low volume area in between. Additionally, the 5D VPOC has shifted from 5045 to 4985. Remaining within the lower distribution and leaving the gap unfilled would favor a downside continuation. Buyers aim to fill the gap and re-establish acceptance within Friday’s range. Tomorrow, FOMC minutes and NVDA ER after-hours.
For tomorrow, the Smashlevel (Pivot) is 4995, representing today’s volume ledge. Break and hold above 4995 would target the unfilled gap at 5012.75. Acceptance within Friday’s range would target the final upside target of 5032. Holding below 4995, indicating continued weakness, would target a value traverse toward 4978, as well as the final downside target of 4960.
Levels of Interest
Going into tomorrow's session, I will observe 4995.
Break and hold above 4995 would target 5012 / 5032
Holding below 4995 would target 4978 / 4960
Additionally, pay attention to the following VIX levels: 16.12 and 14.74. These levels can provide confirmation of strength or weakness.
Break and hold above 5032 with VIX below 14.74 would confirm strength.
Break and hold below 4960 with VIX above 16.12 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.
Great visual! Saving that in my Smash folder!
Thank you, buddy! Another green day longs and shorts.