ES Daily Plan | January 11, 2024
All weekly upside targets have already been achieved. Consequently, I will adopt a defensive approach and closely monitor the behavior around the 4825 level.
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 (ON) session unfolded uneventfully, marked by trading activity confined within yesterday's value area. Consolidation at the upper end of a balance area during the overnight session is typically concerning for sellers, as it may suggest that a potential breakout attempt is underway. A decisive upward move occurred in the European session, however, the market promptly reversed course upon precisely reaching the 6-day balance high at 4804.
The RTH session opened a few ticks below our pivot at 4796, and a rally towards the initial target at 4808 was initiated (4807.25). Subsequently, a pullback occurred with the potential for a “look above and fail” scenario. The pullback needed to find acceptance below the opening level and 4796, which sellers were unable to achieve. The AM session was trading within the initial balance range, balancing in the upper end of the 6-day balance and coiling for another breakout attempt, which materialized in the PM session. The highlighted P-shape profile was resolved as buyers successfully reached the final upside target of 4825. Notably, this level was not only our intraday target but also our weekly target (as outlined in the Weekly Plan), making it a less favorable area for chasing. Adding to the caution, the VIX remained flat. A quick 20-handle reversal followed.
All weekly upside targets have already been achieved (4825)—a scenario I preferred to unfold before the release of significant data, including CPI tomorrow and PPI on Friday. Consequently, I will adopt a defensive approach and closely monitor the behavior around the 4825 level. In the event of a break and hold above, the upside targets are quite straightforward, with the current all-time highs at 4838/4841 (ES) and the SPX ATH at 4818.62, roughly corresponding to 4855 for ES. Failure to observe an upside continuation would target the 4796/4786 support area—a crucial level for buyers to maintain.
For tomorrow, the Smashlevel (Pivot) is 4825, representing the Weekly Extreme High from the Saturday-published Weekly Plan. Break and hold above 4825 would target the current all-time high (ATH) from the regular trading hours and overnight session at 4839.75 and 4841.50, respectively. Break and hold above 4841, indicating a weekly balance breakout, would target 4855. It's worth noting that the SPX has not yet reached its ATH, situated at 4818.62, which roughly corresponds to 4855 for ES. Holding below 4825 would target the prior ATH at 4808, as well as the support area from 4796 to final downside target of 4786 in the event of sustained weakness.
Levels of Interest
Going into tomorrow's session, I will observe 4825.
Break and hold above 4825 would target 4841 / 4855
Holding below 4825 would target 4808 / 4796 / 4786
Additionally, pay attention to the following VIX levels: 13.22 and 12.16. These levels can provide confirmation of strength or weakness.
Break and hold above 4855 with VIX below 12.16 would confirm strength.
Break and hold below 4786 with VIX above 13.22 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.
In addition to monitoring intraday VIX levels, keep an eye on 11.74 for the rest of the week. A VIX below 11.74 and ES above 4825 has potential for further strength.
Thank you, buddy! Your DEC levels made today another successful trading day for me.