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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
The overnight session was rather weak, with the auction rotating lower to test the Smashlevel at 7866, where responsive buyers initially stepped in. However, the bounce was short-lived, with sellers quickly regaining control and breaking below the level shortly after. Failing to defend 7866 was the first clue of weakness, while the second was breaking and holding below the critical 7847 (DT1) level, which marked both Tuesday’s gap and the prior ATH. The key for buyers was to reclaim 7847 in RTH, as acceptance back within Monday’s range would have been a bearish development.
The RTH session opened within Monday’s range, creating a true gap down. This also put a potential island reversal pattern in play, with Tuesday’s session forming the island. The VIX was holding above its resistance level at 15.72, another data point in favor of sellers. Contextually, sellers had everything in their hands to cause damage, which they did with the initial move lower in the A-period, taking control of both the opening level and the overnight low.
However, after the initial weakness, downside momentum notably stalled around Monday’s VPOC, where two-sided trade took place. This was a bearish consolidation until proven otherwise, meaning the expected behavior was a continuation lower. The C-period attempted to do so, extending the Initial Balance to the downside. However, this attempt ultimately failed after coming a few handles shy of the final downside target at 7811 (FDT), from which a reversal unfolded. The return within the Initial Balance, effectively negating the intraday balance breakdown, combined with VIX slowly dropping back below its resistance, was a clear clue to be cautious about pressing shorts. Following this, the tone shifted, and the session ultimately closed within Monday’s gap area, something stronger sellers should not have allowed.
Session Recap
Tuesday’s true gap higher, followed by today’s gap lower, left sellers with an island reversal pattern to work with, an opportunity they ultimately failed to fully take advantage of, judging by how the session played out.
With the session closing within Monday’s gap area, the key in the short term is to monitor whether sellers can break 7848 and build value below, which would be a bearish development, or whether buyers can reclaim 7866 and gain traction within Tuesday’s range, confirming that sellers remain weak.
In terms of levels, the Smashlevel is at 7848, the prior ATH, which closely aligns with the Weekly VWAP. Holding above 7848 would signal stability and target 7866 (UT1), where a potential LAAF is of interest. Acceptance above 7866 would signal intraday strength, targeting 7887 (UT2), with 7915 (FUT) serving as the final upside target under sustained buying pressure.
On the flip side, failure to hold 7848 shifts focus to 7811 (DT1), where a potential LBAF is of interest, with 7791 (FDT), Monday’s single prints, serving as the final downside target under sustained selling pressure.
Visual Representation
Levels of Interest
Going into tomorrow’s session, I’ll closely observe the behavior around 7848.
Holding above 7848 would target 7866 / 7887 / 7915
Break and hold below 7848 would target 7811 / 7791
Additionally, pay attention to the following VIX levels: 15.76 and 14.42. These levels can provide confirmation of strength or weakness.
Break and hold above 7915 with VIX below 14.42 would confirm strength.
Break and hold below 7791 with VIX above 15.76 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.
From me, and all the Franks, Thank you Smash !
Thanks Smash!