For new followers: The yellow levels highlighted at the bottom left of the chart 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

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Contextual Analysis

Tuesday’s session closed near the upper end of the multi-day balance area. The absence of initiating buyers during the overnight session led to a test of the initial downside target at 5774, which buyers successfully defended (ONL: 5773.50). Consequently, the market returned to the balance highs and consolidated ahead of the RTH session, signaling a potential breakout attempt in the making. Buyers attempted a breakout during the initial balance (the first 60 minutes of RTH) but struggled to gain meaningful traction above the ATH at 5797.50.

Aggressive buyers were unable to push through passive limit orders, ultimately leading to a failed breakout. We carry forward today’s high (ATH: 5798.75) as both poor and weak due to its precise alignment with the previous ATH. According to general balance guidelines, if there’s a lack of continuation following a breakout attempt, it can trigger moves in the opposite direction. The remainder of the session saw a move back toward the 5774 level; however, the overall downside pace was lackluster.

The main theme continues to be responsive two-sided activity, following the lack of initiating buyers in today’s breakout attempt. The key question now is whether today’s lack of strength will set the stage for a test of the opposite side of the balance. The afternoon rally high at 5783 is of interest in the short-term. GDP data and Powell on deck tomorrow pre-open.

In terms of levels, the Smashlevel is at 5783, marking today’s afternoon rally high. Holding below this level would target the support area between 5750 and 5740, effectively completing a full traverse of the multi-day balance area. Failure to hold below 5783 would target the current ATH at 5798.75, with a final target at 5820 under sustained buying pressure.

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Levels of Interest

Going into tomorrow's session, I will closely observe the behavior around 5783.

Break and hold above 5783 would target 5798 / 5820
Holding below 5783 would target 5750 / 5740

Additionally, pay attention to the following VIX levels: 16.22 and 14.58. These levels can provide confirmation of strength or weakness.

Break and hold above 5820 with VIX below 14.58 would confirm strength.
Break and hold below 5740 with VIX above 16.22 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.

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Weekly Plan

Make sure to review the Weekly Plan, which provides a broader perspective and highlights key levels of interest to observe in the upcoming week.

Smashelito’s ES/SPX Newsletter

ES Daily Plan | September 26, 2024