ES Daily Plan | May 16, 2024
Today's session gapped higher, forming a triple distribution profile with three sets of single prints, and printed a new ATH following the break of the monthly balance high.
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 was reminiscent of yesterday's, characterized by uneventful trading activity until the release of the CPI data. Our main focus was on Tuesday's K-period single prints, and the strongest response from the market was to maintain above 5266, marking the lower end of the upper distribution, as discussed. Both the Asian and European session printed a low of 5266.25. Following the data release, the market spiked higher and never looked back.
The RTH session opened with a true gap to the upside, and buyers immediately attempted to break and hold above the overnight high in the A-period. This typically represents the strongest response when gapping higher. However, selling activity emerged near the overnight high, leading to an inventory correction. This pullback only partially filled the gap, with buyers stepping in and defending the full session VWAP. Ideally, following the inventory correction, buyers aim to reclaim the opening level and overnight high, which signals strength. This was achieved in the C-period, which formed the first set of single prints and reached the final upside target of 5307. Above the overnight high, it became very difficult to find compelling reasons to initiate short positions. Additionally, during the D-period, the level of 5307 was breached, with the VIX breaking its support at 12.84, confirming strength.
Regular readers of this newsletter are aware that I generally stay away from fading during such scenarios, as there is potential for further strength—a simple yet powerful concept. Despite several reasons to avoid shorting, we know that traders often go against these types of moves, which is essentially why the profile has this shape with multiple sets of single prints. Always be aware of the context, as it will help you stay on the right side. Additionally, it's worth noting that refraining from chasing longs was also an acceptable approach. You don’t need to engage when the market becomes too emotional.
The market is currently within the weekly resistance area, which complicates the outlook for the rest of the week. It's also worth noting that we have already exceeded the Monthly Extreme High (May) of 5305 (refer to the Weekly Plan). Additionally, we are trading around the prior ATH at 5322.75, which was the 2-month balance high. Having said that, it’s not the most optimal location to start initiating new longs. At the same time, initiating shorts are not of interest until the market accepts back below the prior ATH and negates today’s gap. The strongest response from the market would involve establishing value above the prior ATH, indicating a successful monthly balance breakout that could have strong follow-through. As a short-term trader, I will continue to navigate this market day by day, having in mind that we are currently one-time framing up across all time frames.
Today's session gapped higher, forming a triple distribution profile with three sets of single prints, and printed a new ATH following the break of the monthly balance high. The unfinished business at the prior ATH has been resolved, and the market is now one-time framing up across all time frames. The main focus will be on the buyers' ability to maintain above the prior ATH. The area between 5330 and 5323 is of interest in the short term.
For tomorrow, the Smashlevel (Pivot) is 5330/5323, representing today’s spike base and the prior ATH. Holding above 5330, signaling strength, would target the Weekly Extreme High of 5340. Acceptance above 5340 could lead to further squeezing, targeting 5355, as well as the final upside target of 5375. Break and hold below 5323 would target structural fills toward 5308, as well as the final downside target of 5291, in the case of continued weakness.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5330/5323.
Holding above 5330 would target 5340 / 5355 / 5375
Break and hold below 5323 would target 5308 / 5291
Additionally, pay attention to the following VIX levels: 12.98 and 11.92. These levels can provide confirmation of strength or weakness.
Break and hold above 5375 with VIX below 11.92 would confirm strength.
Break and hold below 5291 with VIX above 12.98 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.
I entered a long on the pullback to VWAP, took some profits at 5307 and held onto a runner hoping that VIX would collapse :D It turned out to be a homerun! Thanks for all you do!
It's amazing that now responsive selling is so absent. I chose CL today. Lol.