ES Daily Plan | February 23, 2024
Today’s session resulted in a double distribution trend day, breaking out from the weekly balance area following a significant true gap to the upside.
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 market already made a notable move to the upside yesterday after-hours following the NVDA earnings report. The overnight session saw an upside continuation, which was significant, to say the least. The final upside target for today was 5032, where the upside momentum momentarily stalled during the Asian hours. However, during the European session, buyers continued to drive price higher, reaching the daily and weekly balance high, where the Monthly and Quarterly Extremes are also situated. Additionally, the VIX opened below its support level of 14.66, confirming the market's strength and remaining below it throughout the entire session. Regular readers of this newsletter know that I typically avoid fading during such scenarios (ES above 5032 & VIX below 14.66), recognizing the potential for further strength. This powerful concept helps me avoid potentially fighting against the trend, a crucial aspect of successful trading.
The RTH session opened with a significant true gap to the upside, and the market corrected inventory for about 10 handles before notable buying activity showed up at 5055. Note the big blue delta bar on the profile at today’s lows. Buyers swiftly took control of the opening level and breached the overnight high, both significant references when the market opens with a true gap up. Following this, the daily and weekly balance high was breached and then successfully defended in the subsequent periods. With ES and VIX confirming strength, quickly reclaiming the ONH and opening level following limited interest in corrective activity, and breaking out of the weekly balance, it became very difficult to find compelling reasons to initiate shorts. While it may be acceptable not to feel comfortable initiating longs given the substantial move already made, attempting to short today's session was contextually suboptimal. Contextual awareness remains the most crucial aspect of trading. Personally, I was not very active today, as these types of sessions aren't my preference. If you had a challenging session, my advice is to avoid social media. That time is better spent reflecting on what went wrong, as it's the only way to truly improve.
Today’s session resulted in a double distribution trend day, breaking out from the weekly balance area following a significant true gap to the upside. The market is one-time framing up across all time frames, indicating that buyers are in control of the auction. As is typical with any breakout scenario, the structure left behind is poor and the primary focus is to closely monitor for continuation (Acceptance) or lack thereof (Rejection). The strongest response from the market would involve maintaining within or above today’s upper distribution, indicating a potential new phase of imbalance. Today’s high is poor. A more moderate response would see acceptance back within the lower distribution, while the weakest response would be acceptance below today’s low, casting doubt on today’s breakout.
Monitoring the Monthly and Quarterly Extremes remains crucial. Sellers don’t want value to be established above, as it could potentially trigger further squeezing. Today’s session came within 7 handles of the Weekly Extreme High of 5115, prompting the question of how attractive new long positions are at this moment, given the break of 5071/67 and that the short-term value (5D VPOC) is situated 120 handles below today’s settle (4977). Simultaneously, shorting isn't a viable option unless a failed breakout scenario unfolds. Personally, I will play defense tomorrow, and allow the market to process today’s move. Stay nimble.
For tomorrow, the Smashlevel (Pivot) is 5091, representing the lower end of today’s upper distribution. Holding above 5091, signaling strength, would target the Weekly Extreme High of 5115. Acceptance above 5115 would target an upside continuation toward the prior Weekly Extreme High of 5135. Break and hold below 5091 would target the Monthly and Quarterly Extreme Highs at 5067 and 5071, respectively. Acceptance back within the prior 2-week balance area would target fills of today’s A-period excess toward 5055, where notable order flow activity was observed today.
Levels of Interest
Going into tomorrow's session, I will observe 5091.
Holding above 5091 would target 5115 / 5135
Break and hold below 5091 would target 5071 / 5067 / 5055
Additionally, pay attention to the following VIX levels: 15.16 and 13.92. These levels can provide confirmation of strength or weakness.
Break and hold above 5135 with VIX below 13.92 would confirm strength.
Break and hold below 5055 with VIX above 15.16 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.
I MUST say THANK YOU again. Done for the day and in the green. I thank GOD I found you. Have a Blessed Day Smash!
Excellent Smash. Incredible week to say the least.