Welcome to this week’s plan. Inside, you’ll find a quick review of last week’s price action, key economic events, market structure, context for the week ahead, and the levels I’ll be focusing on. Let’s get prepared.
Contents
Last Week in Review
Economic & Earnings Calendar
Market Structure
Contextual Analysis & Plan
Key Levels of Interest
Last Week in Review
Last week’s plan:
Last week kicked off with weakness on Monday after a true gap down. Sellers took control of the key 7711 level overnight, effectively negating Thursday’s breakout from the prior week (see Figure 1). Failure to defend 7711 was short-term bearish, opening the door to filling the bull gap at 7637.75, as outlined in last week’s plan.
“If we open with weakness, the key for buyers will be to defend the LVN at 7711, which aligns with the Weekly VWAP at 7709. Failure to defend this area, effectively rejecting Thursday’s breakout, would be short-term bearish and once again bring the bull gap at 7637.75 into play.”
Monday’s weakness was followed by another true gap down on Tuesday, filling the bull gap at 7637.75 in the process. Filling the gap meant that the auction had reached a critical inflection point, as it was retesting the multi-week balance breakout—the prior ATH at 7648. The session formed an excess low, which was an important nuance to carry forward given the critical HTF location (see Figure 2).
Excess
Excess marks where an auction is shut off. Price moves away from value, fails to facilitate further trade, and is rejected as opposing participants step in.
It is commonly seen as tails, single prints, or tapering volume, and often marks the end of one auction and the beginning of another.
Until excess appears, stay with the prevailing move. An auction without excess is often a sign that the directional move has not yet reached exhaustion.
Notably, both Monday’s and Tuesday’s true gaps remained unfilled heading into Wednesday. A great reversal unfolded on Tuesday from an order flow perspective after buyers failed to fill the gap (see Figure 3).
Sellers made an attempt at downside continuation on Wednesday overnight, which resulted in a Look Below and Fail (LBAF) of Tuesday’s low (see Figure 4). This sequence marked the low of the week. The RTH session then formed a double distribution trend day to the upside, filling Tuesday’s bear gap in the process.
Upside momentum carried into Thursday, which saw a true gap higher and another double distribution trend day to the upside, driven by headlines (see Figure 5). Buyers were unable to sustain the momentum on Friday, as the auction rotated back into Thursday’s lower distribution, where we closed out the week. However, Thursday’s true gap at 7691.25 remained unfilled.
If we take a look at the weekly levels, we can see how early weakness resulted in a test of 7637. The lack of initiating sellers below 7637 resulted in a rotation higher and a test of 7755, where responsive sellers stepped in.
Weekly Levels in Review
Economic & Earnings Calendar
Market Structure
🟩 Daily: OTFU | Ends at: 7711.75
🟥 Weekly: OTFD | Ends at: 7766.50
🟩 Monthly: OTFU | Ends at: 7542.75
Balance: A market condition where price consolidates within a defined range, reflecting indecision as the market awaits more market-generated information. We apply balance guidelines, favoring fade trades at range extremes (highs/lows) and preparing for breakout setups if balance resolves.
One-Time Framing Up (OTFU): A market condition where each subsequent bar forms a higher low, signaling a strong upward trend.
One-Time Framing Down (OTFD): A market condition where each subsequent bar forms a lower high, signaling a strong downward trend.
Contextual Analysis & Plan
For this week, the main focus will be on whether buyers can sustain upside momentum after defending the multi-week balance breakout last week. This was followed by a sustained true gap higher on Thursday.
Buyers now need to break the pattern of weekly lower highs and shift value higher, rather than allowing the continued development of overlapping lower value. Early-week development relative to Thursday’s gap at 7691.25 will therefore be key to monitor.
If we open with weakness, the key for buyers will be to defend Thursday’s true gap at 7691.25. Failure to defend this area, effectively rejecting Thursday’s shift in tone, would be short-term bearish and open the door to another test of the prior ATH at 7648.
If we open with strength, the key for sellers will be to defend last week’s HVN at 7757. Failure to defend this area would set the stage for a revisit of the all-time highs.
The weekly Smashlevel is 7691, Thursday’s true gap. Holding above 7691 would be short-term bullish, targeting the HVN at 7757. Acceptance above 7757 would signal strength and open the door to bullish continuation toward the resistance area between 7825 and the Weekly Extreme High at 7855, where responsive sellers can be expected.
This resistance area will be crucial for sellers to defend, as failure to do so means that five weeks’ worth of inventory would need to start covering.
Break and hold below 7691 would be short-term bearish and target another test of the prior ATH at 7648. Acceptance below 7648, indicating a failed multi-week balance breakout, would signal weakness and open the door to bearish continuation toward the support area between 7570 and the Weekly Extreme Low at 7540, where responsive buyers can be expected.
This support area coincides with the weekly bull gap at 7541 and will be crucial for buyers to defend. Failure to do so would open the door to a return to the HVN at 7440, the long-term value (90D VPOC).
Visual Representation
Key Levels of Interest
In the upcoming week, I will closely observe the behavior around 7691.
Holding above 7691 would target 7757 / 7825 / 7855* / 7895 / 7935
Break and hold below 7691 would target 7648 / 7570 / 7540* / 7485 / 7440
*Weekly Extremes (defined by proprietary models). I exercise caution when initiating trades outside the Weekly Extremes to avoid impulsive decisions at unfavorable locations. Essentially, the Weekly Extremes act as a safeguard against emotionally-driven trades, which is far from ideal for making well-informed decisions.
As usual, a detailed Daily Plan will be posted tomorrow. Hope you all enjoy the rest of the weekend!
Great read! Thank you!