ES Daily Plan | March 1, 2024
Despite today’s volatile moves, the overall picture remains unchanged, with the market still confined within the multi-day balance area, coiling for a directional move.
Visual Representation
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.
Contextual Analysis
Weakness was observed yesterday after-hours, leading to another test of 5067, where buying activity once again stepped in. In the overnight session, this drop was retraced during the Asian hours but saw a sharp reversal and a downside continuation in the European session. The potential catalyst today, as discussed, was the PCE data, which triggered a 35-handle bounce, and the market was back at the 5093 level.
This positive response resulted in the market opening with a true gap to the upside, making the conditions in the RTH session quite straightforward. Buyers aimed to hold above the opening level and the overnight high, targeting the upper end of the multi-day balance area. Conversely, sellers' objective was to fill the gap and establish acceptance within yesterday’s range. Buyers managed to maintain these references in the A-period, with a negative delta. However, the aggressive sellers entering in the B-period instantly gained downside traction, leading to a gap-fill and forming single prints.
The gap-fill found buying activity, but the subsequent bounces had trouble closing the B-period single prints, which was a nuance. The patient buyer waits for the single prints to be filled with a reclaim of the opening level, while a seller can work the short side using these references to manage their risk. The C and D-period witnessed a battle, with sellers emerging victorious during the E-period, resulting in a flush and a third test of the 5071 area, which is now considered weak. In the PM session, buyers reclaimed yesterday’s high, driving the market higher into the month-end close, forming an M-period spike, only to promptly reject it and close within value. Note how the M-period spike tested and rejected Friday’s upper distribution. The VIX support level provided in the prior plan was 13.30, and the LOD was 13.30.
Despite today’s volatile moves, the overall picture remains unchanged, with the market still confined within the multi-day balance area, coiling for a directional move. As always, the longer a consolidation lasts, the more significant the move out of it tends to be.
I will use the 5106 level as a reference in the short-term. Buyers aim to reclaim it, targeting the upper end of the multi-day balance area and a potential breakout attempt. Failure to do so would target today’s afternoon pullback low at 5089, followed by a fourth test of the 5071 area, which is considered weak.
For tomorrow, the Smashlevel (Pivot) is 5106, representing today’s M-period spike base. Break and hold above 5106 would target 5121, marking the upper end of the current 6-day balance area. Acceptance above 5121 would target a breakout toward the final upside target of 5135. Holding below 5106 would target today’s afternoon pullback low at 5089. Acceptance below 5089 would target fills of today’s E-period excess toward the Quarterly Extreme High at 5071, which is now considered weak.
Levels of Interest
Going into tomorrow's session, I will observe 5106.
Break and hold above 5106 would target 5121 / 5135
Holding below 5106 would target 5089 / 5071
Additionally, pay attention to the following VIX levels: 13.98 and 12.80. These levels can provide confirmation of strength or weakness.
Break and hold above 5135 with VIX below 12.80 would confirm strength.
Break and hold below 5071 with VIX above 13.98 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.
The 5095 fight today is quite interesting.
Thank you for your fantastic work 🌼