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
The overnight sessions continue to provide solid opportunities. The most notable setup played out during the European session, where the market looked above the Smashlevel of 5217, triggering stops from both the Asian session and yesterday’s after-hours, before swiftly reversing course. This reversal quickly led to a test of the support area from 5202 to 5193. I will provide a visual of this sequence on Substack for reference.
The RTH session today closely resembled yesterday's, albeit in reverse. We opened with a true gap to the downside, and similar to yesterday's buyers, sellers struggled to sustain downward momentum, leaving the initial balance low intact. Note how the selling shut off within the support area, resulting in the formation of a poor low. Buyers managed to break the initial balance high, triggering a short-covering rally that produced four (!) sets of single prints, and fully traversed yesterday’s range, ultimately reaching the resistance area from 5233 to 5243. Both the gap-fill at 5210.75 and the test of 5217 saw selling activity that caused price to stall; nonetheless, passive buyers effectively absorbed this selling pressure, paving the way for an upside continuation.
Today’s session resulted in an outside day to the upside with four sets of single prints, as sellers were unable to sustain downside momentum following a true gap lower. The daily is currently in a 6-day balance coiling for a directional move, as it awaits additional market-generated information. FOMC on deck tomorrow, serving as a potential catalyst. Given the historical impact of FOMC events on the market, it's wise to stay nimble and consider closing positions 30 minutes before the event to avoid getting caught up in the noise surrounding the FOMC announcement. With today’s session closing at the upper end of the balance area, considered resistance, there is an immediate need for initiative buyers. The absence of such activity will attract responsive activity, targeting fills of today’s structure. In terms of immediate focus, I’m keeping an eye on the 5239 level.
For tomorrow, the Smashlevel (Pivot) is 5239, representing the M-period spike base. Holding above 5239, indicating acceptance, would open the door for a breakout attempt targeting 5260. Acceptance above 5260, indicating a strong breakout, would target the resistance area from 5280 to the final upside target of 5290, representing the Weekly Extreme High. Break and hold below 5239, indicating rejection, would target a test of the afternoon pullback low of 5226. Failure to hold 5226 would open the door for a cleanup of today’s structure toward the support area from 5203 to the final downside target of 5193.
Levels of Interest
Going into tomorrow's session, I will observe 5239.
Holding above 5239 would target 5260 / 5280 / 5290
Break and hold below 5239 would target 5226 / 5202 / 5193
Additionally, pay attention to the following VIX levels: 14.46 and 13.18. These levels can provide confirmation of strength or weakness.
Break and hold above 5290 with VIX below 13.18 would confirm strength.
Break and hold below 5193 with VIX above 14.46 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.
Awesome work! Love the added visuals as always!