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The yellow levels highlighted at the bottom left of the chart are the primary intraday levels I focus on. To avoid impulsive decisions at poor trade locations, I follow a simple but effective rule: exercise caution when initiating trades outside of these yellow levels.
This means I’m cautious about chasing longs above the Final Upside Target (FUT) and shorts below the Final Downside Target (FDT). It’s important to understand that not chasing does not imply initiating a trade in the opposite direction. Discipline over impulse.
Be sure to review the Weekly Plan for a broader perspective, key levels, and market expectations for the week ahead.
Catalysts
Contextual Analysis & Plan
During the overnight session, buyers attempted to gain meaningful traction above 7747 (Smashlevel), which they ultimately struggled to do. The auction revisited both 7718 (DT1) and 7772 (UT1) overnight, with both levels finding an opposite response, meaning a reaction against the direction of the initial move into the level (see Figure 1).
The RTH session opened above 7747, making that level of immediate interest for buyers to defend, which, as discussed, would be a short-term bullish development. Why? Because doing so would reject Tuesday’s value and break the pattern of developing lower value that has been in play this week. Buyers defended 7747 (7748) during the A-period, resulting in a move toward 7772 (UT1). So far, the market has remained contained between 7718 and 7772 this week, two levels also highlighted in the Weekly Plan.
After tagging 7772, the upside momentum notably stalled, and the auction saw two-sided trade for most of the session. When the auction returns to an area of prior value, such as the HVN at 7772, it’s not uncommon to see this type of behavior. Buyers and sellers have previously found agreement around this price, so revisiting the area can naturally lead to renewed two-sided trade rather than immediate continuation.
The tone changed during the last 30 minutes of RTH, referred to as the M-period, as we saw a closing liquidation break. The key question now is whether value will follow price or if the auction will rotate back toward established value. Tomorrow’s value development will therefore be important to monitor, particularly in relation to today’s highlighted spike area.
Session Recap
After building value above Tuesday’s value area, the auction closed with a downward spike in the M-period, creating a disconnect between price and value. Tuesday’s poor low was cleaned up in the process.
Contextually, not much has changed. Continued value development within Tuesday’s range and acceptance of the lower prices created by today’s spike would be a bearish development. A very weak market will accept below the key 7718 level, aligning with the Monthly VWAP.
Negating the closing weakness by reclaiming today’s spike base at 7747, which also aligns with the current weekly VWAP, would signal short-term strength.
In terms of levels, the Smashlevel is at 7718, the prior gap, which aligns with the Monthly VWAP. Holding below 7718 would maintain downside pressure and target the HVN at 7687 (DT1), where a potential LBAF is of interest. Acceptance below 7687 would signal intraday weakness, targeting 7669 (DT2), with 7640 (FDT), the Weekly Extreme Low, serving as the final downside target under sustained selling pressure.
On the flip side, reclaiming 7718 shifts focus to today’s spike base at 7747 (UT1), where a potential LAAF is of interest, with the HVN at 7772 (FUT) serving as the final upside target under sustained buying pressure.
Visual Representation
Levels of Interest
Going into tomorrow’s session, I’ll closely observe the behavior around 7718.
Break and hold above 7718 would target 7747 / 7772
Holding below 7718 would target 7687 / 7669 / 7640
Additionally, pay attention to the following VIX levels: 17.14 and 15.54. These levels can provide confirmation of strength or weakness.
Break and hold above 7772 with VIX below 15.54 would confirm strength.
Break and hold below 7640 with VIX above 17.14 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.
Thank you Smash!!
Initial balance: Let me know if that short pays.
M period: Oh that trade? It that still on?
Thanks for your excellent analysis Smash.