ES Daily Plan | June 4, 2024
With buyers failing to establish meaningful momentum above 5300 and sellers struggling to gain traction below 5270, attention remains on monitoring Friday’s highlighted M-period spike.
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
The overnight session displayed notable strength, with the market exploring prices above Friday’s high and showing minimal interest in trading within Friday’s highlighted M-period spike.
The overnight strength led to the RTH session opening with a true gap up, effectively shifting the daily to one-time framing up. The early inability to break and hold above the overnight high, typically the strongest response when gapping higher, prompted corrective activity. This pullback during the A-period filled the gap, where buying activity emerged. As regular readers are aware, following the inventory correction, buyers ideally aim to reclaim the opening level and overnight high, signaling strength.
While the B-period remained relatively quiet, trading in and out of Friday’s range, the pace notably picked up during the C-period after breaching the initial balance low. The downside momentum stalled within the 5280/5270 support area; however, sellers managed to initiate another downside leg in the F-period, effectively tagging our final downside target at 5253. Additionally, VIX breached its resistance level of 13.54 during this downward sequence. If the market would break and hold below 5253, the general approach is to avoid trying to fade the move, as there is potential for further weakness. After spending less than 5 minutes trading below the 5253 level, with the H-period forming an outside bar, the afternoon session completely retraced the morning weakness and closed back at the Smashlevel of 5300, effectively rejecting the developing triple distribution profile.
Mirroring Friday’s session, today saw morning weakness, initially forming a triple distribution to the downside, fully retraced during the afternoon session. With buyers failing to establish meaningful momentum above 5300 and sellers struggling to gain traction below 5270, attention remains on monitoring Friday’s highlighted M-period spike, keeping the levels of interest unchanged for tomorrow.
For tomorrow, the Smashlevel (Pivot) is 5300, representing Friday’s M-period high. Break and hold above 5300, signaling strength, would target the high volume node (HVN) at 5323. Acceptance above 5323 would then target the final upside target of 5342. Holding below 5300 would target the support area from 5280 to 5270, where the spike base and prior Weekly VWAP are located. Break and hold below 5270, signaling weakness, would target the final downside target of 5253.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5300.
Break and hold above 5300 would target 5323 / 5342
Holding below 5300 would target 5280 / 5270 / 5253
Additionally, pay attention to the following VIX levels: 13.74 and 12.46. These levels can provide confirmation of strength or weakness.
Break and hold above 5342 with VIX below 12.46 would confirm strength.
Break and hold below 5253 with VIX above 13.74 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.