ES Daily Plan | May 7, 2024
While the monthly and weekly time frames remain in balance, the daily imbalance phase continues with another true gap higher. The base of the spike at 5200 is of interest in the short-term.
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 overnight session kicked off with a look above Friday’s high and fail, triggering a shallow pullback. The fact that this pullback not only failed to test Friday's halfback but also its VPOC indicated strength, suggesting a lack of stronger sellers. The formation of a poor low further indicated that sellers were being shut off, adding another nuanced observation. During the European session, the 5174 level was breached and held on the retest, resulting in the RTH session opening with another true gap to the upside.
RTH session pulled back at the open, tested the 5174 level, and found buying activity. A break and hold above the 5174 level was highlighted as a “Bullish response” in the previous plan, meaning that there was no reason to look for any shorts if above; instead, the better approach was to identify setups in line with the short-term trend. As always, the opening level and the overnight high are key reference points when gapping higher, both of which buyers immediately reclaimed during the A-period. In other words, within the first 30 minutes, market-generated information signaled caution with shorts.
The best long setup today unfolded during the afternoon pullback in the F-period. The market retraced and tested the opening level and overnight high, coinciding with the full session VWAP, which is a very reliable reference to use when the market is directional (trending). I will provide a separate visual on Substack to illustrate this sequence and highlight the crucial order flow activity. The final upside target of 5194 was reached during the J-period, causing a temporary stall in the upside. Despite the VIX not confirming strength, the market managed to form an upward spike in the closing session—a move I wouldn't chase if I were flat.
While the monthly and weekly time frames remain in balance, the daily imbalance phase continues with another true gap higher, which remains unfilled. An upward spike was formed in the closing session, effectively cleaning up the poor structure from 4/15 in the process. The base of the spike at 5200 is of interest in the short-term. Trading within and above the spike area (acceptance) would represent the most favorable scenario for buyers aiming to break above the 3-week balance high and target the high volume node at ~5255. On the other hand, rejecting the spike could lead to a potential pullback; however, buyers should remain comfortable as long as the unfilled gap at 5166.75 is maintained. It's worth noting that both SPX and SPY have breached their respective 3-week balance highs already.
For tomorrow, the Smashlevel (Pivot) is 5200, representing the M-period spike base. Holding above 5200, signaling acceptance, would target the 3-week balance high at 5213. Break and hold above 5213, shifting the weekly to OTFU, would target 5232, as well as the final upside target of 5250, with the Weekly Extreme High slightly above at 5260. Break and hold below 5200 would target the support area from 5185 to the afternoon pullback low of 5179. Acceptance below 5179 would then target the unfilled daily gap at 5166.75.
Levels of Interest
Going into tomorrow's session, I will closely observe the behavior around 5200.
Holding above 5200 would target 5213 / 5232 / 5250
Break and hold below 5200 would target 5185 / 5179 / 5166
Additionally, pay attention to the following VIX levels: 14.02 and 12.96. These levels can provide confirmation of strength or weakness.
Break and hold above 5250 with VIX below 12.96 would confirm strength.
Break and hold below 5166 with VIX above 14.02 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.
Thank you, buddy, slow morning but the afternoon was great.
Hey Smash. What are you using for VIX in SC? VOLX or /VX? Thx