ES Daily Plan | January 16, 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 pivot for the session (Smashlevel) was at 5878, with the overnight session printing a low of 5879.50 during the European session's opening pullback. This setup provided a solid opportunity to target the initial upside level at 5900 ahead of the CPI data release. Before major events like this, I always go flat, as the risk of a significant move in either direction is substantial. Today’s reaction to the CPI numbers was no exception, with the market experiencing an impulsive move to the upside. In hindsight, it might be exciting to discuss a 100-handle move from the pivot, but as futures traders, there’s no need to expose ourselves to such risk.
The RTH session opened with a large true gap to the upside, breaking out of the 3-day balance and opening near the high volume node (HVN), which served as the upside magnet in the event of a breakout. Sessions that open with large true gaps above the final upside target are my least favorite to trade, as the risk/reward is not appealing. Since fading these types of moves from balance is generally inadvisable, there’s little to do other than scalp in the direction of the move and not overstaying your welcome in any trades. The VIX broke its support level of 17.54 during the CPI release, a condition that favored buyers.
The next level of interest to the upside was the Weekly Extreme High, the weekly target at 5990. Approaching 5990 during the initial balance already made it even more tricky to chase further upside. The 5990 level provided a notable 30+ handle drop before buyers re-entered. Having reached 5990 already makes the rest of the week challenging to navigate, because acceptance above opens the door for a continued squeeze, while failure to do so is not necessarily bearish. Trouble for buyers would only kick in with acceptance back within the 3-day balance area. Stay nimble.
The market exploded to the upside today following the CPI data release, opening with a true gap up and closing within the middle distribution of the trend day on January 7th. In the process, our weekly upside target at 5990 was tagged—a key pivot to monitor for the remainder of the week. The highlighted poor structure from January 7th remains the primary target for buyers, while acceptance below 5965 could open the door for technical fills toward the gap.
In terms of levels, the Smashlevel is at 5990. Holding below this level would target 5965, with a final target at 5935 under sustained selling pressure. Conversely, failure to hold below 5990 would target 6009, with a final target at 6029 under sustained buying pressure, completing the cleanup of the poor structure.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5990.
Break and hold above 5990 would target 6009 / 6029
Holding below 5990 would target 5965 / 5935
Additionally, pay attention to the following VIX levels: 17.10 and 15.14. These levels can provide confirmation of strength or weakness.
Break and hold above 6029 with VIX below 15.14 would confirm strength.
Break and hold below 5935 with VIX above 17.10 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.
Great write-up as always!
The relentless selling at 5990!