ES Daily Plan | January 31, 2024
The key question now is whether sellers can find acceptance within Monday’s lower distribution (<4933), following the weakness after-hours.
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.
Throughout most of the overnight session, trading took place within Monday's highlighted upper distribution, with brief price exploration above it and a few fills of the L-period single prints below, attracting responsive buyers. Consolidating at higher prices following a breakout in an uptrend is consistently viewed as bullish because it indicates acceptance of the price at these levels.
The RTH session opened at the lower end of Monday’s upper distribution, which remained effectively defended throughout the entire session. Notably, even the B-period, with a negative delta of 6K, failed to breach it, highlighting the state of the sellers. The overall session was notably muted, requiring minimal analysis. While it's common for price action to calm down following a trend day as the market processes the breakout, today's level of quietness was extreme, with a range of just 16 handles. A new ATH printed 5 ticks above Monday’s high, making it a questionable high.
While the RTH session remained relatively quiet, the after-hours session saw an increase in activity, resulting in a break below 4945 and subsequently leading to the filling of Monday’s L-period breakout single prints. The key question now is whether sellers can find acceptance within Monday’s lower distribution (<4933) to target 4917 and potentially 4900, or if this was just technical fills before proceeding higher. Buyers aim to reclaim 4945, which could lead to another squeeze fueled by these sellers.
Tomorrow's FOMC meeting is anticipated to introduce substantial volatility, as usual. Given the historical impact of FOMC events on the market, it's wise to stay nimble and consider closing positions 30 minutes before the event, and avoid getting caught up in the noise surrounding the FOMC announcement.
For tomorrow, the Smashlevel (Pivot) is 4945, representing the lower end of Monday’s upper distribution. Break and hold above 4945, potentially triggering a squeeze, would target the 100% range expansion level at 4960, as well as 4975, the lower end of the weekly resistance area. Acceptance above 4975 would target the Monthly Extreme High of 4993. Holding below 4945 would target the breakout single prints at 4933, coinciding with the Weekly VWAP. Break and hold below 4933 would target the high volume node (HVN) at 4917, acting as a downside magnet. In the case of continued weakness, the target is a traverse of the 3-day balance area toward 4900.
Levels of Interest
Going into tomorrow's session, I will observe 4945.
Break and hold above 4945 would target 4960 / 4975 / 4993
Holding below 4945 would target 4933 / 4917
Additionally, pay attention to the following VIX levels: 13.92 and 12.70. These levels can provide confirmation of strength or weakness.
Break and hold above 4993 with VIX below 12.70 would confirm strength.
Break and hold below 4917 with VIX above 13.92 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.