2/21 SPX, SPY, ES, QQQ Trade Plan
Kangaroo Market...
Hello fellow traders. For those of you in the USA I hope you enjoyed today’s holiday! Having these days off helps us find time with loved ones or time for ourselves, which I find very important to lead a healthy and successful life.
With that said, let’s get right into it…
For a recap of Friday’s trading please see my Tweet from Friday.
Major events are on deck that could guide the market’s next move or will we continue to dance in this kangaroo market…zoom out on your charts and see how we have been trading in the same range all month long - 4038-4195. Some key levels to keep in mind as we wait to see what way the market chooses.
Before we review tomorrow’s trade plan as this letter focuses on key options greeks such as Vanna, Charm, Gamma I want to discuss the impact of these greeks during a period where Vanna and Charm have lesser of an impact.
@perfiliev has a great write up on this on his site, but high level after OPEX we typically have a window of weakness where the market is not held as much by Vanna and Charm. As you may have noticed our rally has largely been pushed due to negative Charm, but in the week after OPEX Vanna and Charm play a lesser role. There will be key levels in Gamma and even Vanna we will want to keep in mind, but we need to find the areas of most volatility if we were to believe in the below. For this I will be keeping a close eye on Vega and some key areas of interest there.
Again some believe in the below and some don’t. Let’s not predict, levels are levels, and they will trigger dealers to do something. It’s how much they need to do and the why. This is where vol.land helps us with the necessary data to make a better analysis and judgement.
I enjoy interacting and learning from other traders so continue to share your trades, ideas, and how you use this trade plan by messaging me on Twitter @DarkMatterTrade.
News Catalyst
This week is high in news catalyst’s with FOMC Meeting Minutes on Wednesday and Core PCE on Friday.
Tomorrow we have a pre-market mover and one after the market opens…
8:30am est - CAD CPI
9:45am est - Flash Services PMI & Manufacturing PMI
For more information on these news events, visit the Economic Calendar
Below you will find the key earnings reports for this week highlighted by Walmart, Home Depot, Coinbase, Toll Brothers and Nvidia.
SPX Notes:
Remember you can use this SPX trade plan to trade ES or SPY.
Orange - We had a failed breakout of the wedge and then a breakdown below with a test of this wedge come at the close of Friday’s (2/17) session
Blue - This trendline was broken at FOMC around 4093/95, but have now broken below it. Will this act as a key resistance line?
Purple - This trendline is from our October 2022 lows - it shows potentially where if it were to be tested it would be in the 3985-4000 level
White - this is our trendline from the Covid 2020 low - currently price is below it and could be another key area of interest for the bears
SPX’s weekly option expected move is ~72.25 points. SPY’s expected move is ~7.42. Remember over 68% of the time price will resolve it self in this range by weeks end.
SPX/ES/SPY Trade Plan:
Bullish bias:
Above 4080 target 4100
If there is a failed breakdown at 4065 target 4080
If there is a failed breakdown at 4040 target 4065
Below 4065 target 4040
If there is a failed breakout above 4075 target 4040
If there is a breakdown of 4040 target 4010
If there is a failed breakout above 4100 target 4080
Vol.land Data
For a better understanding of the various greeks below I would suggest you visit the Volland YouTube Page. Volland provides unique data showing where dealers are positioned providing in my opinion a higher degree of conviction to where price may move to.
Vanna - Levels where price may repel or act as magnet
Remember for price to go above spot through a magnet or repel VIX and IV must decrease. For price to go below spot through a magnet or repel VIX and IV must increase.
Above Spot:
4080-4100 are positive vanna’s - acting as magnet
4100 is our large positive vanna - acting as magnet
4120 is a minor negative vanna - acting as repellent
4125/30 are minor positive vanna’s - acting as magnet
4150 and 4175 continue to be major negative vanna’s - acting as repellent
Below Spot:
4075 is a minor negative vanna - acting as repellent
4065 is a key minor positive vanna - acting as magnet
4040 is a minor negative vanna - acting as repellent
4035-4010 are minor positive vanna - acting as magnet
4005 is a minor negative vanna - acting as magnet
4000 is a major positive vanna - acting as magnet
The total value of vanna at this level went from $2B to over $8B from Friday
Our range could be 4040-4100
4075-4065 is a cluster of negative vanna’s that will need VIX to increase to break as support
If 4040 breaks down, it targets 4000 and this is an area I would add size in puts
It’s a hard argument for the bulls to see upside above 4100
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
4080 is a positive Gamma - acting as resistance
4100 is a positive Gamma - acting as resistance
If price gets above 4095 this will increase dealer buying pressure
Below Spot:
4070 is a minor positive Gamma - acting as support
4065 is a major positive Gamma - acting as support
4005 is a minor positive Gamma - acting as support
3990 is a minor positive Gamma - acting as support
Price below 4070 will increase dealer selling pressure to 4030
4100 will be a major barrier to get past for bulls
4065 is a major level and if lost takes towards 4000
QQQ Trade Plan
Unfortunately, I do not have time today to do a QQQ trade plan and will come back with one tomorrow.
Stay #paytient and react to the key levels - no predictions! Good luck traders.
I am going to share my key rules to intraday trading in the end of the plan moving forward to build better habits and allowing you to grow as a better trader.
My Intraday Trading Rules
I do not trade within the first half hour UNLESS I am in a trade from the prior session and looking to close the trade or we have a major gap or a key level already broken
I let the initial balance do its thing - I am just a small fish in a large ocean of traders so let's let them fight it out
I then wait for key levels targeting one level to the next and taking profits at each one.
If there are key levels that are 10pts apart that is when I have scalping mindset and anything above 10pts I want to give it the room to hit the price target with a 5 pt buffer to take profits once we reach within 5 pts of a target - I also tighten my stop loss once at 10-20% profit with the goal of never allowing trades to go red when I have a nice profit)
I supply options greeks with OB (order blocks) and FVG (fair value gaps) otherwise known as Smart Money Concepts
When I am scalping - ie targeting 10pt trade levels I will take profits and never go more than 10% red. Simple as that, know your trade plan strategy and the risk. When you are wrong you are wrong and reset
For 20pt trade level targets I will increase my stop losses to 20% and allow more of the trade to play in the event I entered too early
I try - key word try ha - avoid trading lunch hours defined as 12pm to 2 pm est. Money for the most part unless you are scalping - is made in the first 2 hours of the trading day and the last 2 hours
I always stick to two EMA’s on my chart and that’s the 10/50 EMA’s
When the 10ema is above 50ema we are bullish
When the 10ema is below the 50ema we are bearish
Go put these on your charts and when you view them on timeframes less than the daily timeframe you will see the power they provide
For scalpers out there the smaller timeframes provide great opportunities to scalp 5-10pt moves
There are more we could discuss including volume profile, low volume nodes that I think are great strategies to compliment option greeks. Maybe in the future we can include more details.
Trading is not for the unprepared. It is critical you abide to a strategy and checklist and walk into every trade with a plan. Without a plan you are simply gambling and have a better chance at the slot machines. There are more nuances to my weekly and daily checklists, but I think this provides a good read for now and we will/can continue adding to it.
To cover our basis…
Welcome to my Substack where I provide a daily SPX trading plan to help guide my intraday trading. The purpose of this letter is not to advice you on your trading or investment decisions. I am simply documenting my daily trading plan for myself to help with planning and execution. These are simply my opinions and the data sourced from the likes of vol.land, TradingView, Tradytics and others. The stock market is risky, gains are not guaranteed. This is not about getting rich quick, but learn to educate yourself and make the necessary financial decisions on your own. This is not financial advice.
Awesome write up