ES Daily Plan | July 11, 2024
Daily one-time framing up remains intact. CPI data tomorrow pre-open.
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.
Visual Representation
Contextual Analysis
As we've discussed on many occasions, balanced conditions involve responsive activity, with buying occurring below value and selling above value, indicating agreement among market participants on the prevailing value. However, as highlighted in the previous weekly plan, balanced conditions are not expected to last indefinitely and will eventually result in a directional move, known as imbalance. Generally, the longer a balance phase lasts, the more significant the subsequent breakout or imbalance tends to be. On July 3rd, buyers initiated a breakout from the 11-day balance area, shifting the daily from balance to one-time framing up, meaning a move from responsive to initiating activity. This shift means that continuing to use the same strategy as in a balanced, responsive market, such as selling above value, will get you absolutely smashed during a phase of imbalance. Understanding whether the market is in a state of balance or imbalance will drastically help in making better trading decisions, as you can immediately eliminate certain trades or directions and focus on one side.
The main focus this week was to monitor for continuation (acceptance) or lack thereof (rejection). After Tuesday’s session, the short-term value (5D VPOC) shifted higher, following the price action, and the market has yet to end the daily one-time framing up since the breakout. We are now more than 100 points above the breakout point at 5585, approaching both the Weekly and Monthly Extreme highs, highlighting the intensity of this breakout. I generally avoid chasing when the market becomes overly emotional, especially beyond the intraday targets. However, when the overall trend is aligned, chasing can be more forgiving, but it’s still not my preferred approach. If you had a challenging session, my advice is to avoid social media. That time is better spent reflecting on what went wrong, as it's the only way to truly improve.
The market continues to demonstrate the power of transitioning from balance to imbalance following the breakout on July 3rd. Now more than 100 points above the breakout point, we are approaching both the weekly and monthly targets. Before even considering to play hero, the market needs to return to balance on the daily, ending the phase of imbalance, as we've frequently discussed.
Today’s highlighted spike area from the M-period is of short-term interest. The strongest response would involve establishing value within or above the spike area, targeting 5715+. Rejection of the closing strength would open the door for a test of 5660, and potentially 5645. CPI data tomorrow pre-open is obviously the main event.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5676.
Holding above 5676 would target 5705 / 5715 / 5730
Break and hold below 5676 would target 5660 / 5645
Additionally, pay attention to the following VIX levels: 13.36 and 12.34. These levels can provide confirmation of strength or weakness.
Break and hold above 5730 with VIX below 12.34 would confirm strength.
Break and hold below 5645 with VIX above 13.36 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!
Todays session was deceiving at first since we had two prior session open higher then ranged all day. I had a plan of selling 50 and buying 40 in the morning. But when market rocket higher from 40 right after euro close and potential single forming, selling became a no-no.