ES Daily Plan | February 4, 2025
My preparations and expectations for the upcoming session.
For new followers: The yellow levels highlighted at the bottom left of the chart 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.
Visual Representation
Contextual Analysis
The overnight session mirrored last week, opening with a significant gap lower following the weekend headlines. The similarities continued as the market tested the Weekly Extreme Low at 5955; however, this time, there wasn’t as much trading activity below it compared to last week. As regular readers of this newsletter know, the earlier the Weekly Extremes are tagged, the riskier they are to chase. This made shorts below 5955 unfavorable, regardless of whether the market continued its downward move or not. That said, just because the market has been unable to gain traction below the Weekly Extremes for two weeks in a row doesn’t mean it won’t do so in the future. So far, buyers have been active on dips and getting paid for it, largely because the market is currently in balance in the bigger picture.
The RTH session tested 5955, and simultaneously, news headlines dropped, triggering short-covering. Funny how news always seems to drop at key areas. The market quickly established a double distribution profile, reclaiming the final downside target at 6015, which was a key level. The afternoon session attempted to form a triple distribution; however, a pullback unfolded during the closing periods, and the session ended within last Monday's value area.
Much like last week, a weak overnight session cleared all weekly downside targets (5955) and formed a large true gap (6057.75), followed by short-covering during the RTH session. A double distribution was formed, with its upper distribution located within last week's range. Buyers aim to reclaim the immediate resistance at 6058-68 (tested after-hours) for a continued squeeze, while trouble would kick in if the afternoon pullback low (6004) is not defended.
In terms of levels, the Smashlevel is at 6037. Holding below this level would target the afternoon pullback low at 6004, aligning with the lower end of the upper distribution. Acceptance below 6004 signals weakness, targeting the support area between 5965 and 5955. Conversely, failure to hold below 6037 would target the resistance area between 6058 and 6068 (tested after-hours), with a final target at 6093 under sustained buying pressure.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 6037.
Break and hold above 6037 would target 6058 / 6068 / 6093
Holding below 6037 would target 6004 / 5965 / 5955
Additionally, pay attention to the following VIX levels: 19.70 and 17.54. These levels can provide confirmation of strength or weakness.
Break and hold above 6093 with VIX below 17.54 would confirm strength.
Break and hold below 5955 with VIX above 19.70 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
Make sure to review the Weekly Plan, which provides a broader perspective and highlights key levels of interest to observe in the upcoming week.
Thank you for the lesson Smash.
Weekly extreme nailing the bottom again! Thanks Smash!