ES Daily Plan | January 28, 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 notable poor structure formed during the recent rally, including three unfilled gaps, was highlighted in the Weekly Plan. The main question was whether the market could sustain this momentum or if it was time for technical fills. While the structure was undeniably poor, I did not anticipate the market to correct as aggressively as it did during the overnight session, which was essentially bidless. However, signs of weakness emerged early in the session, with the first being sellers triggering a breakdown by gapping below the 3-day balance area, creating an island top. The second was the break of the final downside target at 6087, followed by a failure to reclaim it, after which downside momentum accelerated.
The overnight session printed a low at 5948 (!), breaking the Weekly Extreme Low at 6000 in the process—a significant development. Pressing shorts below 6000 this early in the week was obviously unfavorable, so it was no surprise to see the market recover back above it before the RTH open. As discussed, a market that holds the weekly support area between 6030 and 6000 is not in trouble. The question now is whether the low is in and if today’s liquidation of weak longs was what patient buyers were waiting for. The key caveat is the heavy economic data and major tech earnings this week, making it a less-than-ideal time for large bets in either direction.
The sharp overnight liquidation led to a large true gap down in the RTH session, opening right at the Weekly Extreme Low of 6000, where late shorts were instantly squeezed. Once the extremely short inventory was corrected, tagging last week’s low, the market shifted into two-sided activity for the rest of the session. Heavy aggressive selling was absorbed around the 6015 level, leaving a notable excess low in A-period, which ultimately led to a closing squeeze and a close back within last week’s range.
Sellers managed to initiate a balance breakdown after a true gap down during the overnight session, resulting in a nasty liquidation and emotional price action. The RTH session, however, was all about short-covering. Immediate attention is on last week’s low of 6043, which buyers managed to reclaim by the close.
In terms of levels, the Smashlevel is at 6043, marking both the initial balance high and last week’s low. Holding above this level would target fills of the overnight single prints at 6072, with a final target at 6098 under sustained buying pressure. Conversely, failure to hold above 6043 would target a retest of 6015, where notable orderflow activity was observed, with a final target at 6000 under sustained selling pressure, effectively filling today’s excess low.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 6043.
Break and hold above 6043 would target 6072 / 6098
Holding below 6043 would target 6015 / 6000
Additionally, pay attention to the following VIX levels: 18.94 and 16.86. These levels can provide confirmation of strength or weakness.
Break and hold above 6098 with VIX below 16.86 would confirm strength.
Break and hold below 6000 with VIX above 18.94 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.
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