ES Weekly Plan | August 12-16, 2024
My expectations for the upcoming week.
Visual Representation
Market Structure
🟩 DAILY: OTFU | ENDS: 5324.75
🟥 WEEKLY: OTFD | ENDS: 5385.25
🟨 MONTHLY: BALANCE | TBD
Contextual Analysis
During the previous week, the market saw a significant true gap down on Monday, which effectively tagged the 10% correction level at 5149, marked as an outlier risk to the downside in the previous Weekly Plan. However, buyers managed to close the session above the Weekly Extreme Low of 5215. In Tuesday’s daily plan, we discussed that the market had moved significantly away from key value references (5D and 20D VPOC). This distance was further increased by Monday’s gap lower, making the location for initiating new shorts less attractive. The market grinded higher during the rest of the week, filling Monday’s gap and closing back within the highlighted lower distribution. This price action was not unexpected, given the 454-handle range observed in the first three sessions of August, which was a bit too much too quickly. Note how the weekly support area held firm during both Tuesday’s and Wednesday’s sessions.
For this week, the main focus remains on the highlighted double distribution profile established two weeks ago following the true gap lower observed on Friday, August 2nd. After another gap lower on Monday that tagged the 10% correction level at 5149, the market has since worked its way back toward the lower distribution. The key question now is whether this bounce is largely driven by short-covering. The strongest response from the market would involve a return to and acceptance within the upper distribution, filling the 5444.75 gap in the process. Failure to do so would maintain downside pressure. In terms of economic data, PPI is scheduled for release on Tuesday, followed by CPI on Wednesday and Retail Sales on Thursday.
The weekly Smashlevel (Pivot) is 5385, representing both last week’s high and, more significantly, the upper end of the large distribution on the composite profile. Break and hold above 5385, effectively ending the weekly one-time framing down, would target the 5% correction level at 5435 and the unfilled gap at 5445, located at the lower end of the upper distribution from two weeks ago. Acceptance above 5445 signals strength, targeting the resistance area from 5500 to the Weekly Extreme High of 5530, where selling activity can be expected. Note how this resistance area coincides with the composite HVN, making it a crucial area for sellers to defend.
Holding below 5385 would target the low of the highlighted lower distribution from two weeks ago at 5331. Acceptance below 5331 signals weakness, targeting the Monthly Extreme High at 5285 and the support area from 5230 to the Weekly Extreme Low of 5200, where buying activity can be expected. Note how this support area coincides with the lower end of the prior 3-week balance area from May.
As usual, a detailed daily plan will be published tomorrow. In the meantime, enjoy the rest of your weekend!
Levels of Interest
In the upcoming week, I will closely observe the behavior around 5385.
Break and hold above 5385 would target 5435 / 5445 / 5500 / 5530* / 5576 / 5611
Holding below 5385 would target 5331 / 5285 / 5230 / 5200* / 5149 / 5127
*Weekly Extremes. I exercise caution when initiating trades outside the Weekly Extremes to avoid making impulsive decisions at unfavorable locations. Essentially, the Weekly Extremes serve as a safeguard against emotionally-driven trades, a state that is less than ideal for making well-informed trading decisions.
Economic Calendar
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.
Thanks! I'm finally beginning to see how value is more important that price. I think I have just had an AHA moment.
Thanks. Excellent analysis as always...