ES Daily Plan | February 22, 2024
In the very short term, I will be observing buyers' ability to remain within the upper distribution on the short-term volume profile highlighted in blue.
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 overnight session remained relatively uneventful, with trading activity confined within Tuesday's value area. Buyers failed to breach Tuesday's volume ledge, triggering a value traverse, which concluded during the early stages of the European session.
The RTH session also started quietly, characterized by two-sided activity within the overnight range during the initial couple of periods. Sellers made attempts to push lower during both the G and H-periods, but their efforts lacked follow-through, resulting in a formation of a weak low followed by a reversal. Another attempt to drive prices lower occurred during the FOMC minutes, during which sellers successfully reached the final downside target of 4960. The key difference today, compared to yesterday when the market also reached the final downside target, was the behavior of the VIX. It remained unable to breach its resistance level at 16.12 (HOD: 16.12). This is signaling that you want to be cautious chasing further downside as the market approaches the 4960 level, a point we've discussed repeatedly. Sellers who got caught selling 4960 faced a vicious 40-handle reversal during the closing session, reaching the Smashlevel of 4995. Those who closely follow my weekly plans were aware that 4960 also marked the upper end of the highlighted weekly support area.
Today’s session concluded with a vicious 40-handle rally following the achievement of all downside targets. Consequently, during the M-period (last 30 minutes of RTH), a new intraday high was reached. This spike area holds significance, as it will be closely monitored by buyers seeking to maintain it, while sellers will be focused on rejecting it to maintain the downside pressure. The market has already made a notable move after-hours following the NVDA earnings report. In the very short term, I will be observing buyers' ability to remain within the upper distribution on the short-term volume profile highlighted in blue. A return within the lower distribution would be a sign of weakness.
For tomorrow, the Smashlevel (Pivot) is 4998, representing the top of the spike area. Holding above 4998, indicating acceptance of today’s closing strength, would target the unfilled gap at 5012.75. Acceptance within Friday’s range would target the final upside target of 5032. Break and hold below 4998, would target the spike base of 4987. Acceptance below 4987, indicating a rejection of today’s closing strength, would open the door for another test of 4960.
Levels of Interest
Going into tomorrow's session, I will observe 4998.
Holding above 4998 would target 5012 / 5032
Break and hold below 4998 would target 4987 / 4960
Additionally, pay attention to the following VIX levels: 16.02 and 14.66. These levels can provide confirmation of strength or weakness.
Break and hold above 5032 with VIX below 14.66 would confirm strength.
Break and hold below 4960 with VIX above 16.02 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, buddy! Choppy session but the last 30 minutes prior to closing did it, green all the way!
Potential island gap forming...