ES Daily Plan | May 22, 2024
The longer a consolidation phase lasts, the more significant the subsequent breakout tends to be. Currently, the market has established a 5-day balance. FOMC minutes and NVDA earnings tomorrow.
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 market has essentially formed a P-shaped profile within a prevailing uptrend, indicating that the upward auction likely still has room to continue, as there is a notable absence of excess to the upside. Sellers are likely to prefer an immediate upside continuation that ultimately fails, potentially triggering a strong counter-move after establishing an excess high. An immediate pullback without cleaning up the unfinished business is likely to continue attracting reloading buyers.
Having said that, buyers remain in firm control, and the only scenario with the potential to shift market tone is filling the gap at 5274.25 and acceptance back within the lower distribution of the previous week. It’s worth noting that the medium-term value (20D VPOC) has shifted higher from 5246 to 5333 making it an area of interest as directional moves are often initiated from high volume nodes.
The longer a consolidation phase lasts, the more significant the subsequent breakout tends to be. Currently, the market has established a 5-day balance, characterized by responsive, two-sided activity. Notably, the upper extreme has unfinished business, having formed a triple top. I have merged the last five sessions on the chart, highlighting the lack of excess. Tomorrow, we have FOMC minutes, with NVDA 0.00%↑ earnings after the close.
For tomorrow, the Smashlevel (Pivot) is 5345, representing the upper end of the current multi-day balance area. Break and hold above 5345, indicating a successful breakout, would target 5360. Acceptance above 5360 signals intraday bullish momentum, targeting the final upside target of 5375. Holding below 5345, indicating a lack of initiative buyers, would target the 5330-5323 area. Acceptance below 5330-5323 signals intraday bearish momentum, targeting the final downside target of 5308. In the case of sustained weakness, the target is the lower end of the multi-day balance area at 5291.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5345.
Break and hold above 5345 would target 5360 / 5375
Holding below 5345 would target 5330 / 5323 / 5308
Additionally, pay attention to the following VIX levels: 12.38 and 11.36. These levels can provide confirmation of strength or weakness.
Break and hold above 5375 with VIX below 11.36 would confirm strength.
Break and hold below 5308 with VIX above 12.38 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.