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
“Poor structure within a balanced market and poor structure during breakout scenarios are two different situations. The former is more likely to result in fills compared to the latter, making it important to monitor the 5374 level in the short-term.” The overnight session provided an excellent opportunity as the 5374 level was tested and rejected to the tick. Following the rejection, two out of the three sets of single prints were filled before the RTH open.
The weakness continued into the RTH session, with the market experiencing an immediate downside continuation at the open. Consequently, the final downside target of 5337 was reached, completing the intraday downward sequence. Tagging 5337 also meant that sellers attempted an inside day breakdown, which failed completely. There was a brief moment when ES dipped below 5337 while VIX hovered above its resistance level of 13.30; however, this lasted for only about 10 minutes before ES reclaimed 5337 and VIX dipped back below its resistance. As a late seller, the main issue was the low probability of the market collapsing ahead of tomorrow's significant events. Conversely, for buyers, the failed breakdown, coupled with the ES/VIX dynamics, presented an excellent opportunity for a trade in the opposite direction, as per the general guidelines. A full traverse of the inside day range was complete in the J-period, and buyers managed to sustain an inside day breakout, closing at session highs and negating Friday’s excess high in the process. Take note of how Wednesday’s single prints remain unfilled, keeping the trend day intact.
Sellers attempted an inside day breakdown today, but it failed entirely, resulting in a double distribution outside day up that effectively negated Friday’s excess high. Today's high, coming within 1 tick of the all-time high, is considered weak. Obviously, tomorrow is all about the CPI data and FOMC. Contextually, the overall picture remains unchanged, with buyers maintaining control and Wednesday’s double distribution still intact. As discussed in the Weekly Plan, to potentially shift the tone, sellers must negate Wednesday’s trend day and establish acceptance within its lower distribution.
For tomorrow, the Smashlevel (Pivot) is 5381, representing today’s M-period spike base. Holding above 5381, signaling strength, would target an upside continuation toward 5405, as well as the final upside target of 5420. Break and hold below 5381 would target fills of today’s structure toward 5363. Acceptance within todays lower distribution would then target the support area from 5350 to 5340.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5381.
Holding above 5381 would target 5405 / 5420
Break and hold below 5381 would target 5363 / 5350 / 5340
Additionally, pay attention to the following VIX levels: 13.44 and 12.26. These levels can provide confirmation of strength or weakness.
Break and hold above 5420 with VIX below 12.26 would confirm strength.
Break and hold below 5340 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.
Thank you! Tomorrow will be very interesting!