ES Daily Plan | July 12, 2024
b-shaped profile within an uptrend
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
Today's session offered plenty of opportunities based on the references we had prepared for. The overnight session saw minimal activity, trading within Wednesday’s spike area until the release of the CPI data. Following the data release, the market spiked higher and tagged the outlined resistance area from 5705 to the Weekly Extreme High of 5715, coinciding with the Monthly Extreme as well. The market reached an overnight high of 5707.75 (ATH) before retracing back into the spike area ahead of the RTH open. Traders who opened short positions within the resistance area likely had a promising session; however, this resistance primarily served as an area to book profits from long positions rather than attempting to short at the top. Much better short opportunities emerged during the RTH session, despite being initiated at lower levels.
The RTH session opened within the spike area. While the A-period traded in a narrow range, the B-period attempted to explore prices above the spike area. However, this attempt was quickly rejected and met by heavy aggressive selling (-6K delta), leading to a break below the spike base of 5676, which served as our pivot for the session. The bounce in the C-period retested 5676 from below and was quickly rejected, triggering another downside leg and leaving behind a set of single prints from the B-period. The failure to sustain Wednesday’s closing strength targeted 5660 and 5645, the location of Wednesday’s VPOC, which failed to migrate higher. The second short opportunity emerged against the initial balance low in the D-period, which ultimately led to reaching the final downside target of 5645. The VIX did not confirm weakness by staying below its resistance area at 13.36, making it tricky and unfavorable to chase further downside, as we have frequently discussed. The market demonstrated two-sided activity after the D-period. For reference, VIX HOD/LOD was 13.33/12.23, levels outlined in the previous plan was 13.36/12.34.
While the overnight session printed a new ATH at 5707.75 (carry forward), the RTH session established a triple distribution outside day down, forming a b-shaped profile that effectively cleaned up Wednesday’s structure. Given the b-shaped profile in an uptrend, my primary focus will be on today’s main distribution, particularly its upper end at 5648, which aligns with the upper end of the main distribution on the composite volume profile to the far right. Acceptance above 5648, suggesting that today’s session was primarily driven by long liquidation rather than by stronger sellers, the targets would be 5665 and 5685. Failure to do so has potential for further weakness, targeting ~5600. The breakout point at 5585 remains the main level for buyers to defend to avoid additional damage.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5648.
Break and hold above 5648 would target 5665 / 5685
Holding below 5648 would target 5630 / 5313 / 5605
Additionally, pay attention to the following VIX levels: 13.44 and 12.40. These levels can provide confirmation of strength or weakness.
Break and hold above 5685 with VIX below 12.40 would confirm strength.
Break and hold below 5605 with VIX above 13.44 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.
Amazing stuff!
Great stuff, again!
Do you have any content where you go over what you look for in an entry once the Smash level has been hit? Are you looking for an entry at the smash level, or once you get to the smash level, you look for something else to signal an entry, such as a pullback to a fib level, volume, etc? It says wait for a hold above/below - but what exactly is a "hold" defined as?