ES Daily Plan | May 23, 2024
Responsive selling activity continues to emerge at the balance high, with buyers consistently reloading during subsequent pullbacks, maintaining the short-term state of balance.
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
Important note from the previous daily plan that still applies:
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.
During the Asian hours, the overnight session printed a new all-time high at 5349.25. However, buyers failed to maintain above the Smashlevel of 5345, encountering responsive sellers, which led to a return to value. The RTH session tested and rejected the 5345 level to the tick in the D-period, effectively trapping buyers above the initial balance high. This level ultimately marked the high of the session. The afternoon session was characterized by weakness, with a liquidation break unfolding during the I and J-periods. Notably, the VIX breached its resistance level of 12.38 when the ES breached 5330. This can sometimes indicate an early signal that the ES is heading towards its final downside target, as was the case today, reaching 5308. If the market holds below 5308, the general approach is to avoid trying to fade the move, as there is potential for further weakness. Ultimately, we observed a return to the 5323-5330 area, with limited time spent below 5308. Read yesterday's note above regarding reloading buyers.
Responsive selling activity continues to emerge at the balance high, with buyers consistently reloading during subsequent pullbacks, maintaining the short-term state of balance. The context remains unchanged: the market continues to consolidate at higher prices, a bullish indication following the gap higher on April 15th. Even a set of single prints from the 15th remain unfilled, underscoring the lack of conviction from sellers. The upper extreme has unfinished business with a notable lack of excess. In order to see a stronger directional move, the market must establish acceptance beyond this balance range. Until then, stay nimble and caution against overstaying your welcome in any trade.
For tomorrow, the Smashlevel (Pivot) is 5330/5323, representing a pivotal area. Break and hold above 5330 would target 5345. Acceptance above 5345 signals intraday bullish momentum, targeting the final upside target of 5360. Holding below 5323 would target 5308. Acceptance below 5308 signals intraday bearish momentum, targeting the final downside target of 5291.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5330/5323.
Break and hold above 5330 would target 5345 / 5360
Holding below 5323 would target 5308 / 5291
Additionally, pay attention to the following VIX levels: 12.80 and 11.76. These levels can provide confirmation of strength or weakness.
Break and hold above 5360 with VIX below 11.76 would confirm strength.
Break and hold below 5291 with VIX above 12.80 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.
5308 is GODSENT!