ES Daily Plan | July 25, 2024
My preparations and expectations for the upcoming session.
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 outlined in the Weekly Plan published on Saturday, the main focus this week was on the prior multi-day balance area from late June, ranging between 5585 to 5490. Monday’s session ended the daily one-time framing down, holding above 5585. On Tuesday, our attention shifted to the 5615 level and the notable low volume area on the composite profile. Buyers were unable to hold above 5615 on Tuesday, resulting in a reversal and a weak close, forming a downward spike. The overnight session gapped lower, an uncommon occurrence, and notably, this gap remained unfilled, signaling weakness. I used Monday’s range as a reference bar for today, and we can observe how sellers defended its lower end, further indicating market weakness.
The overnight weakness led the RTH session to open on a significant true gap to the downside, with all intraday downside targets already met (5554). I published a pre-open post on X (Link), mentioning that a very weak market will break and hold below the previous week’s low of 5542, potentially targeting 5530 and 5505. Failure to do so could trigger a counter-auction due to inventory being 100% net short. The RTH session immediately broke 5542, indicating no interest in corrective activity—this is the most bearish outcome when gapping lower. Coupled with the bearish signs overnight and a VIX confirming weakness by holding above 15.44, it became very difficult to find compelling reasons to initiate a long. Every bounce attempt was sold. After hitting the 5505 level, the downside momentum stalled for a couple of periods. I posted another visual on X (Link), highlighting the presence of passive buyers below 5505 to emphasize that it wasn't a good area to initiate shorts due to the stalling momentum. A more strategic approach was to wait for a potential afternoon rally that would stop out some of the late sellers and offer higher (better) prices to reload shorts. This scenario unfolded during the H-period when the intraday one-time framing down ended. However, the subsequent bounce was extremely weak, underscoring the weak nature of today's session.
Today’s session formed a multi-distribution trend day, marked by two sets of single prints following a significant true gap down and go. The closing session formed another downward spike, testing the MA50, which is of short-term interest.
In terms of levels, the Smashlevel is at 5474, marking the M-period spike base. The weakest response would involve maintaining within or below the area of the spike, targeting a downside continuation toward 5450, and the final weekly target at 5430. Rejecting the closing spike would open the door for a test of the afternoon rally high at 5509, and the high volume node (HVN) at 5530. The LVN at 5490 is of interest prior to that (currently being tested).
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5474.
Break and hold above 5474 would target 5490 / 5509 / 5530
Holding below 5474 would target 5450 / 5430
Additionally, pay attention to the following VIX levels: 18.88 and 17.20. These levels can provide confirmation of strength or weakness.
Break and hold above 5530 with VIX below 17.20 would confirm strength.
Break and hold below 5430 with VIX above 18.88 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.
Additionally, the Weekly Extreme High for the VIX is also exactly 18.88, adding a layer of significance.
Thanks for the guidance! Proud of myself for not attempting a single long today haha