ES Daily Plan | March 27, 2024
The highly emotional closing session resulted in a downward spike, creating an imbalance between price and value. Monitor for continuation or lack thereof.
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
Large portions of today's session were characterized by low volatility, as it consolidated around the intraday pivot at 5290. Buyers managed to reclaim 5290 and held it during the European session, triggering an upside continuation. However, contrary to expectations, this did not lead to the short-covering rally anticipated. Passive sellers awaited at Friday’s VPOC, resulting in a reversal that erased the gains made during the European session.
The RTH session remained notably quiet until the L and M-period (last hour of RTH), during which the market experienced a directional move. The AM session primarily traded within the initial balance range, while the PM session stayed below 5290, breaking the initial balance low on multiple occasions. When the market is marked by participants grappling for control around the intraday pivot, it's wise to step aside and let other traders fight it out. You are aware that someone will be wrong, providing you an opportunity to play against them later. Of course, today’s move was very hard to catch, given how late it occurred in the session.
Today’s session resulted in an outside day down, forming a double distribution with one set of single prints in the L-period. The highly emotional closing session resulted in a downward spike, creating an imbalance between price and value. As a general guideline: trading within and below the spike base of 5278 (Acceptance) presents a more favorable outcome for sellers, who aim to gain traction within Wednesday’s lower distribution. Buyers aim to reject the late spike and reclaim the highlighted resistance area from ranging from 5278 to 5288.
For tomorrow, the Smashlevel (Pivot) is 5278, representing the M-period spike base. Break and hold above 5278, rejecting the late spike, would target today’s VPOC at 5288. Acceptance above 5288 would target the final upside target of 5308. Holding below 5278, accepting the late spike, would target 5260, as well as the prior 6-day balance high at 5247. In the case of continued weakness, the final downside target is located at 5225.
Levels of Interest
Going into tomorrow's session, I will observe 5278.
Break and hold above 5278 would target 5288 / 5308
Holding below 5278 would target 5260 / 5247 / 5225
Additionally, pay attention to the following VIX levels: 13.80 and 12.68. These levels can provide confirmation of strength or weakness.
Break and hold above 5308 with VIX below 12.68 would confirm strength.
Break and hold below 5225 with VIX above 13.80 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.