ES Daily Plan | February 8, 2024
Today’s session resulted in a double distribution with one set of single prints in the B-period. The highlighted upper distribution serves as the short-term playground.
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
Unlike the two previous overnight sessions, today's session saw a directional move to the upside, in alignment with the prevailing trend. As previously discussed, the acceptance of higher prices following the break from the prior 9-day balance area is a bullish indication that has kept buyers in control. The initial attempt to hold above the Smashlevel of 4978 failed during the Asian session, but buyers experienced greater success during the European session, resulting in a reach of the initial upside target of 4997 before the RTH session opened.
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. As regular readers are aware, two crucial references for buyers when gapping higher are the ON high and the opening level. Generally, maintaining above these reference establishes a challenging environment for sellers. During the A-period, sellers defended the opening level, yet they only succeeded in filling half of the gap, leaving the single prints from the overnight session unfilled. The full session VWAP also remained intact during this correction. Moving into the B-period, buyers regained control of both the opening level and ON high, effectively negating any downside potential, making initiating shorts a non-option, at least in my assessment. The B-period formed single prints, and the market reached the final upside target of 5013. It's worth noting how the upside momentum stalled after reaching this final target. If no trades were made during the initial balance (A & B-period), navigating the market became tricky. Shorting was not an option, and chasing longs seemed unattractive, particularly given the attainment of all upside targets and the lack of confirmation from the VIX. Patient traders waited for dips into the single print area to play against the trapped sellers, but the upside was limited.
The acceptance of higher prices has resulted in another directional move to the upside, in alignment with the prevailing trend. The market is one-time framing up across all time frames, printing new all-time highs. Today’s session resulted in a double distribution with one set of single prints in the B-period. The profile is imbalanced to the upside, suggesting that the auction may not be finished in that direction yet. The highlighted upper distribution serves as the short-term playground. Acceptance above 5018 unlocks an upside continuation, while a move back within the lower distribution opens the door for an attempt at today’s unfilled gap.
For tomorrow, the Smashlevel (Pivot) is 5018, representing the upper end of the upper distribution. Break and hold above 5018 would target an upside continuation toward 5040, as well as the final upside target of 5056. Holding below 5018 would target the upper end of the lower distribution at 4999. Acceptance below 4999 would target today’s unfilled gap at 4978.
Levels of Interest
Going into tomorrow's session, I will observe 5018.
Break and hold above 5018 would target 5040 / 5056
Holding below 5018 would target 4999 / 4978
Additionally, pay attention to the following VIX levels: 13.36 and 12.32. These levels can provide confirmation of strength or weakness.
Break and hold above 5056 with VIX below 12.32 would confirm strength.
Break and hold below 4978 with VIX above 13.36 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.
It's been another thrilling day, my friend! I appreciate all your hard work and dedication.
IN SMASH WE TRUST 🫡