ES Daily Plan | January 9, 2024
Today, an absolutely vicious short-covering rally unfolded, effectively taking out four daily highs in the process and resulting in the formation of four sets of single prints.
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
As we discussed in the Weekly Plan, the main focus for this week centered on evaluating whether sellers could sustain downward pressure or if the shakeout of weak longs from the previous week's b-shaped profile created an opportunity for stronger buyers to enter the market. An absolutely vicious short-covering rally unfolded today, suggesting that the previous week was primarily driven by long liquidation rather than stronger sellers.
The overnight session initially pushed higher but fell short of reclaiming the Smashlevel of 4746 (ONH: 4743.25), leading to sustained weakness. The low volume node (LVN) ranging from 4720 to 4710, highlighted as a crucial area to monitor in the short-term in the previous plan, was tested and, once more, found responsive buyers.
An in-depth analysis of today's RTH session isn't really necessary, as the events unfolded quite clearly. The session opened within Friday’s value area and the Smashlevel of 4746 was immediately put to test in the A-period. Noteworthy order flow activity was observed at 4745, followed by two aggressive attempts from sellers, which passive buyers managed to absorb. This sequence played a pivotal role in the entire session, as buyers successfully regained control of 4746 after that rejection, and the market never looked back. The final upside target of 4767 was reached already in the F-period, and readers of this newsletter were informed of the potential short-covering rally that could be triggered above 4767. The only missing ingredient was the VIX, which, at the very least, turned negative after taking out its resistance level during the European session.
Today, an absolutely vicious short-covering rally unfolded, effectively taking out four daily highs in the process and resulting in the formation of four sets of single prints. We discussed the potential for a squeeze in the prior plan if buyers could gain traction above 4767. I will use M-period’s spike base of 4796 as a short-term reference point. This level holds significance as it also marked the end of the weekly one-time framing up last week. The primary target for buyers is the current all-time highs at 4838/4841 (ES), while a failure to see an upside continuation would target fills of today’s poor structure toward the 4773/4763 support area—a crucial area for buyers to hold.
For tomorrow, the Smashlevel (Pivot) is 4796, representing today’s M-period spike base. Holding above 4796, indicating acceptance, would target the prior ATH at 4808. Break and hold above 4808 would target the Weekly Extreme High of 4825, as well as the current ATH’s at 4839/4841. Break and hold below 4796, indicating rejection, would target the first set of single prints at 4786. Break and hold below 4786 would target the support area from 4773 to the final downside target of 4763.
Levels of Interest
Going into tomorrow's session, I will observe 4796.
Holding above 4796 would target 4808 / 4825 / 4841
Break and hold below 4796 would target 4786 / 4773 / 4763
Additionally, pay attention to the following VIX levels: 13.68 and 12.50. These levels can provide confirmation of strength or weakness.
Break and hold above 4841 with VIX below 12.50 would confirm strength.
Break and hold below 4763 with VIX above 13.68 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.
Thank you, buddy! It was a great trading day. All I can say is WOW.
Love the graphics. Could you go into some detail please on the non cooperative VIX @ 12.74 as mentioned yesterday, why did it not move lower with the continued rally...could this be the concentration of a return to mag 7 stocks rather than broader s&p? Thanks...