ES Daily Plan | May 3, 2024
The market remains in a state of balance, characterized by responsive two-sided activity while awaiting further market-generated information. NFP data pre-open 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 responsive two-sided activity continues. The overnight session gapped above yesterday’s after-hours activity, reclaimed the Smashlevel of 5065, and successfully defended it during the European session. While the market continued to grind higher, it failed to reach the resistance area from 5094 to 5104, with an ON high printing at 5090.
If there's one thing we've learned over the past three weeks, it's that the market has a tendency to fill poor structure, which is not surprising given that all time frames are currently in balance. As I've mentioned before, poor structure within a balanced market and poor structure during breakout scenarios are two different situations. The former is more likely to result in fills compared to the latter. This is why it's so tricky to chase emotional moves in this market environment.
The RTH session already managed to erase the gains from the overnight session within 10 minutes into the B-period, effectively cleaning up the Wednesday’s poor low in the process. A drop of ~50 handles in 40 minutes, speaking of emotional moves. Take note of the relatively wide initial balance range. The failure to gain immediate traction below Wednesday’s low triggered a bounce that tested the 5065 level. Obviously, this level needed to be defended by the sellers to keep a downside continuation alive, and they effectively defended it for a couple of hours before it broke decisively in the H-period. The afternoon session saw a slow upward grind and achieved what the overnight session failed to do—it reached the resistance area from 5094 to 5104 (HOD: 5100.75). The 5104 level represents the medium-term (20-day) and long-term (90-day) value, which acts as a magnet when directional moves away from it fail.
The market remains in a state of balance, characterized by responsive two-sided activity while awaiting further market-generated information. We have experienced unchanged value over the last three weeks, creating a challenging environment for non-short-term traders. The pullback in the M-period is of short-term interest, with buyers aiming for the 5125-5135 resistance area. Acceptance back within today’s value area opens the door for a move down to 5056-5046. NFP data pre-open tomorrow.
For tomorrow, the Smashlevel (Pivot) is 5084, representing the M-period VPOC. Holding above 5084 would target the high volume node (HVN) at 5104. Acceptance above 5104 would then target the resistance area from 5125 to 5135. Break and hold below 5084 would target the support area from 5056 to the final downside target of 5046.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5084.
Holding above 5084 would target 5104 / 5125 / 5135
Break and hold below 5084 would target 5056 / 5046
Additionally, pay attention to the following VIX levels: 15.32 and 14.04. These levels can provide confirmation of strength or weakness.
Break and hold above 5135 with VIX below 14.04 would confirm strength.
Break and hold below 5046 with VIX above 15.32 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.
Thanks, pal! It's been a fantastic day; just needed to practice some patience at the open, but after took longs.