ES Daily Plan | January 12, 2024
My strategy remains unchanged, I will continue to closely monitor the behavior around the 4825 level, our weekly upside target.
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.
The overnight (ON) session witnessed a slow upward grind during the Asian hours, coming close to the weekly balance high, where the current all-time high (ATH) is situated (ONH: 4838). However, sellers entered the scene in the European session, retracing price back to the important 4825 level ahead of CPI data release. Following the CPI data release, the market displayed its typical volatility by initially moving higher before undergoing a subsequent downturn. This downturn was retraced prior to the opening of regular trading hours. This serves as a great example of why it is advisable to go flat prior to the release and let other traders handle the price discovery process.
The RTH session opened above the 4825 level, with notable heavy aggressive buying effort coming in, only to be met and absorbed by passive sellers. Refer to the big blue delta bars on the delta profile. I posted a visual of this sequence on X/Twitter as well.
The inability to maintain above 4825, despite the substantial buying effort, resulted in a noteworthy decline. Sellers managed to clear all downside target down to 4786, all within the initial balance period (A and B-period). The subsequent bounce in the C-period failed to fill the B-period single prints, ultimately resulting in another leg to the downside in D-period as the market attempted to establish a triple distribution trend day down. The final downside target of 4786 was breached in the process, with VIX breaching its resistance level of 13.22, but only for a brief moment. Although the VIX returned below 13.22, the market continued to consolidate below 4786. This was not an ideal location to chase further downside, and the late sellers ended up getting massively squeezed as the market reclaimed the 4786 level. I will provide a visual of the ES and VIX correlation on Substack for reference.
My strategy remains unchanged, I will continue to closely monitor the behavior around the 4825 level, our weekly upside target. Today, buyers failed to maintain above, resulting in a substantial 50-handle decline. In the event of a break and hold above, the upside targets are quite straightforward, with the current all-time highs at 4839/4841 (ES) and the SPX ATH at 4818.62, roughly corresponding to 4855 for ES. The inability to reclaim 4825 would target fills of today’s rather jagged structure toward the 4793/4783 support area—a crucial area for buyers to hold. PPI tomorrow.
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 4793 to final downside target of 4783 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 / 4793 / 4783
Additionally, pay attention to the following VIX levels: 12.96 and 11.92. These levels can provide confirmation of strength or weakness.
Break and hold above 4855 with VIX below 11.92 would confirm strength.
Break and hold below 4783 with VIX above 12.96 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.
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.