ES Daily Plan | May 29, 2024
As a general rule, the longer a consolidation phase lasts, the more significant the subsequent breakout tends to be.
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
Monday’s holiday session is excluded from the chart. The overnight session held above the 5323 pivot (ONL: 5323.50), but buyers struggled to gain traction above it during the RTH session after the failure above Friday’s inside day high. It was interesting how the VIX, which held above its resistance level of 12.46, came down and tested it to the tick, while buyers attempted the inside day breakout, which ended up failing. Sellers managed to traverse Friday’s range, encountering buying activity during the K-period, which led to a return back to value.
There's little to add after today’s session; conditions remain unchanged, with the market maintaining its state of balance. As a general rule, the longer a consolidation phase lasts, the more significant the subsequent breakout tends to be. Until then, stay nimble and caution against overstaying your welcome in any trade. Over the last two sessions, a P-shape profile has essentially formed, suggesting that a breakout would likely target fills of Thursday’s excess high, where responsive sellers are expected to step in. On the other hand, if aggressive buyers fail to push through the passive sellers reloading above the 5323 level for two sessions, the downside risk involves cleaning up the highlighted small set of single prints from Thursday.
Important note from the previous daily plan that still applies:
“As outlined in the Weekly Plan, Thursday’s outside day marks the playground moving forward. Responsive activity is expected within this range, while a stronger directional move requires acceptance beyond its extremes. Although the ATH has established an excess high, we carry forward the untested overnight ATH at 5368.25.”
For tomorrow, the Smashlevel (Pivot) is 5323, representing both the prior 2-month balance high and the prior all-time high (ATH). If you recall, my models identified 5323 as a significant level, highlighted in the Weekly Plan for March 11-15. Break and hold above 5323 would target the high volume node at 5342. Acceptance above 5342 would then target Thursday’s high at 5358, effectively filling the A-period excess. Holding below 5323 would target the top of today’s excess at 5307. Acceptance below 5307 signals intraday bearish momentum, targeting the final downside target of 5290, effectively filling the small set of single prints from Thursday.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5323.
Break and hold above 5323 would target 5342 / 5358
Holding below 5323 would target 5307 / 5290
Additionally, pay attention to the following VIX levels: 13.48 and 12.36. These levels can provide confirmation of strength or weakness.
Break and hold above 5358 with VIX below 12.36 would confirm strength.
Break and hold below 5290 with VIX above 13.48 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.
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