September 10, S&P500 Plan and Missal
Higher plans
Image 1. Tight quarters. W. Petersen, Das Boot (1981)
One day before CPI and sellers have given way to aggressive buying. Consider this positioning ahead of the data - and thus my primary thesis on the weekend that we were headed into balance first, with August halfback defending early on.
I chose one of the best submarine films of all time (my top two, and yes there are a few sub themes) not for the ‘obvious’ reasons - trapped, anxious men fighting for their lives ultimately - more so for the role leadership and openness to information plays in outcomes even in tight, well-known situations. Maybe especially so. Despite the close quarters and intimately familiar terrain, it is impossible to play God. There remains the capricious human aspect, and unknowable forces of circumstance. But even an imperfect captain (they all are) must be a necessary decision-maker. Leadership is not enough - it must be married to skill and knowledge, and a readiness to act on information from others.
We trade in a bubble, not a vacuum.
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Crow’s Nest
What stood out to me on Monday was the bid. This began immediately in the overnight with globex open. While I wrote about a defense of the August halfback (5394) as a scenario I was leaning to - with tests to the upside in a larger balance ahead of CPI - I was admittedly suspicious of the action.
Image 2. Friday RTH to Tuesday ETH.
The LAF setup did not materialize at the open as I did not expect it to once the A period was halfway in. Momentum was too strong, albeit on thin volume. Sellers had stepped aside. hey suddenly came to life at Friday halfback, almost to the tick. This was another clue that sellers were weak, in other words, a mechanical sell at an obvious reference point.
Selling picked up speed as the open broke however very heavy absorption was present on the tape. See the lesson linked for details and a systematic approach of how to trade it. This was only a trap, and the final clue was seller exhaustion as sellers struggled to trade into the pivot 5435, let alone the overnight halfback. Compare this kind of an ‘organic’ bid versus the mechanical, weak selling action at the highs.
Image 2. ES daily profiles and structural levels
Monday left a poor high 5493 intraday, and this will be the focus for me today - as of writing at 6h30EST that level has not broken. Note how this is 100 points above the August halfback - these are not entirely coincidences. Trading is dumb and it should remain that way to serve your advantage.
Regardless I will use it as the day pivot. Buyers obviously want a break and a strong close above Friday’s selling tail to challenge its open, with the ultimate goal of ending daily OTFD - putting the short-term back in balance, trapping sellers, and positioning to upside. I still favor balance heading into CPI, which at this time I lean to being a bullish event. I take it one day at a time regardless.
Your sellers will want to see excess above Monday’s poor high, a traverse of prior day value, and a break of the PDL.
Tuesday Plan and Levels
Pivot 5493. Model was back on track yesterday, currently indicating 48 points range and 13 points potential overshoot.
a) Defense ONL / PDO 5462, early bid at 5481 look to close over pivot on strength. Volume above targets selling tail / psych level 5500 which could see some resistance, Friday open 5516, followed by 5528-5532 daily high where longer-term sellers may enter.
Note 5538 50DMA above which is the buyers’ near-term target. Time spent above the weekly pivot 5489 can maintain a bullish lean. A combination with volume can be lethal for trapped sellers.
b) Time below pivot and volume below 5468 target selling tail 5448 to 5440 100 DMA where longer-term buyers may be encountered. Momentum below looks for 5435, NPOC 5421 at an extreme.
c) VIX pivot at the 19.40 level. Consider seller strength above 20.50, and buyers potentially supported below 18.90.
Image 3. ES 4H levels
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