ES Daily Plan | May 8, 2024
The third consecutive true gap higher failed to hold, indicating potential signs of exhaustion. Nevertheless, buyers continue to maintain firm control.
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
There's no need for a detailed recap of today's rather uneventful session, so I'll keep this very brief. The overnight session failed to test the base of yesterday’s spike, with the European session forming a weak low against the low of the Asian session, shutting off the selling activity.
The RTH session opened with another true gap to the upside, following a pre-open move higher. At this point, you should know the drill; early inability to break and sustain a move above the ONH can create opportunities to fade the market, targeting an inventory correction. The information gained from this inventory correction is highly valuable for assessing the strength or weakness of the auction. The open saw a quick look above the ONH and fail, resulting in a counter move. Nevertheless, this counter move was notably lackluster. Yesterday, we discussed a long setup during the F-period, and today, a nearly identical setup was playing out during the G-period. However, the order flow activity today was not as clean as yesterday's. A bounce of 10 handles unfolded, but the outcome was not as favorable as it was yesterday. The I-period saw a liquidation break, eventually resulting in a gap-fill, providing a bounce with much better confirmation in terms of order flow activity. I will share a visual of this sequence on Substack for reference, using my footprint charts.
The third consecutive true gap higher failed to hold, indicating potential signs of exhaustion. Nevertheless, buyers continue to maintain firm control, with daily one-time framing up remaining intact, now supported by the weekly time frame as well. The primary objective for sellers is to break a previous day’s low, which would bring the daily back to balance. I will continue to monitor Monday’s spike base at 5200. Buyers remain comfortable above this level, targeting the high volume node around 5255. If the market accepts below 5200, we could see a potential test of support area from 5185 to 5179.
For tomorrow, the Smashlevel (Pivot) is 5200, representing Monday’s M-period spike base. Holding above 5200, signaling strength, would target today’s opening level at 5216. Break and hold above 5216 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 Monday’s 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 5216 / 5232 / 5250
Break and hold below 5200 would target 5185 / 5179 / 5166
Additionally, pay attention to the following VIX levels: 13.76 and 12.68. These levels can provide confirmation of strength or weakness.
Break and hold above 5250 with VIX below 12.68 would confirm strength.
Break and hold below 5166 with VIX above 13.76 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.
Hey vix levels are incorrect in middle section (after level of interests)
I was out before the retest!