ES Daily Plan | May 31, 2024
Sellers have initiated a move away from the recent balance area after today’s breakdown—we monitor for continuation (acceptance) or lack thereof (rejection).
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 weakest response would involve a break and hold below 5275”. Weakness already developed yesterday after-hours, with sellers breaking the multi-day balance low of 5275. The overnight session saw continued downside pressure during the Asian hours, coming within 4 handles of our final downside target of 5246 (ONL: 5250.50). A bounce unfolded during the European session, traversing the Asia range. Notably, the VIX tested its resistance level of 14.84 during the European open, printing a high of 14.88 (HOD). Significant order flow activity was observed at 5272 pre-open, continuing into the early stages of the RTH session. A replay of this sequence will be available on Substack.
The RTH session opened with another true gap down. Buyers attempted to fill the gap during the A-period but failed, as the passive seller at 5272 had other plans. Notably, the VIX tested its support level of 13.72 almost to the tick (13.74) during the initial balance. The market was one-time framing down intraday for the initial four periods; however, sellers failed to test the ONL and the 5246 target. Once the E-period breached the D-period high, thereby ending the one-time framing down, short-covering unfolded. The buyers' second attempt to fill the gap and test Thursday's lower distribution of interest was also rejected in the afternoon session. This led to further weakness, with another downside leg, effectively reaching 5246 and testing the monthly VWAP in the process. The 5246 level served as a HVN from a prior area of balance, often targeted during an imbalance phase in the market, which the daily chart is currently experiencing.
The daily chart is now one-time framing down, following the break from the multi-day balance area. Additionally, the weekly one-time framing up has ended, bringing it back to balance, which was the primary objective for sellers. Thursday’s lower distribution was our area of interest, and now, sellers have initiated a move away from the recent balance area after today’s breakdown—we monitor for continuation (acceptance) or lack thereof (rejection).
In the short-term, I will use the closing spike in the M-period as a guideline. The weakest response would involve maintaining within or below the area of the spike, favoring a downside continuation toward 5225 and 5213. Rejecting the closing spike would open the door for a retest of the multi-day balance low. The strongest response would involve acceptance back within Thursday’s outside day range, potentially triggering a failed breakdown scenario. PCE data tomorrow pre-open.
For tomorrow, the Smashlevel (Pivot) is 5253, representing today’s M-period spike base. Break and hold above 5253, rejecting the spike, would target a retest of the multi-day balance low at 5274, Take note of the unfilled daily gap slightly above at 5278.75. Acceptance above 5274 would then target the final upside target of 5290. Holding below 5253, accepting the spike, would target a downside continuation toward the Weekly Extreme Low of 5225, as well as the final downside target of 5213, representing a weekly NVPOC.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5253.
Break and hold above 5253 would target 5274 / 5290
Holding below 5253 would target 5238 / 5225 / 5213
Additionally, pay attention to the following VIX levels: 15.10 and 13.84. These levels can provide confirmation of strength or weakness.
Break and hold above 5290 with VIX below 13.84 would confirm strength.
Break and hold below 5213 with VIX above 15.10 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.
Great stuff Smash! Love the replays!