September 4, S&P500 Premarket Plan and Missal
Balance Breakdance
Image 1. ES daily TPOs
Notes are as of 6h00EST. A reminder that we have JOLTS today at 10h00EST which likely brings volatility. A jolt?
Reflecting on Tuesday, it was quite clear from the action in NVDA that news was known well in advance, by none other than Option Queen Pelosi of course - among others - who miraculously sold her calls ahead of the drop. Recall that there is no such thing as predicting a market, or fairness from the SEC… we only trade with probabilities and flow. Keep your mind open and don’t marry a trade.
Marrying Pelosi on the other hand is another topic for discussion.
This is also a reminder to zoom out on your charts. We identify patterns for a reason, while there are no guarantees they often keep us on the right side of the trade. This is one reason why I chose 5631 as Tuesday’s pivot, which turned out to be one point above the HOD at open. Use the pivot to keep yourself on the right side of the trade.
Image 2. ES one hour chart. Don’t overcomplicate
Housekeeping: as for the couple of 1dte calls I bought at the close as a lotto… that’s why it’s a lotto and not your inheritance! I will conduct funeral rites for these later this evening.
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Crow’s Nest
We have broken ten days of balance to the downside, with a close below which puts the bulls on the defensive. That balance area stores a lot of energy, much like a spring. Go with the break of balance unless it is rejected, in which case an opposite and potentially stronger move can often result.
Sellers managed to repair the poor low, but this was met with strong excess, or a buying tail, into Tuesday’s close. However, as of writing we are at the lows of this tail which is not an encouraging sign. Some of the blame is no doubt on the Nikkei taking a more than 4% hammering in the Tokyo session.
Shorts are now eyeing a gap fill below, while longs need to reclaim balance - and quickly. Note the three sets of singles above which represent clear upside targets, no need to overthink this.
I will respect the excess formed on Tuesday, using the highs of M period as the day’s pivot. It is also a convenient psych number - 5550 - just above the 50DMA at 5544. This was a level of support I was looking for in the weekly plan and no small coincidence that Tuesday closed at this level. My bias is currently neutral to down but will shift to the upside once there is a decisive close above the pivot and movement into the lows of balance (5574).
For a bullish picture you do not want prices to linger at the lows and move quickly out, especially on a break of major balance.
Image 3. ES Tuesday RTH to Wednesday ETH as of 8h30EST
Wednesday Plan and Levels
Pivot 5550. Range expectations currently given by the model are 64 points with a 16 point possible overshoot. Note that Tuesday overshot range expectations by more than double - yes, tails happen and as the model relies heavily on VIX, a spike at the open will rapidly change the output.
a) Defense of the ONL / 5504 and above 5534 looks to reclaim the pivot in IB - a level which sellers may defend. Momentum above targets singles at 5561, 5568, and PDPOC 5577 / balance low. Strong bids could see 5595 to 5602 repaired above.
b) Pressure below pivot and volume below 5534 look to break the ONL / 5504 targeting 5488 gap fill. This area could see a responsive bid with congestion of the ATH AVWAP and swing low AVWAP around 5595-96 (Image 4). Further weakness would aim for the 5469 NPOC and 5455 buying delta at an extreme.
c) VIX pivot 20.90 with seller strength possible above 22.90, and buyers potentially supported with the index below key psych level 20.
Image 4. ES Daily levels
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