2/23 SPX, SPY, ES Trade Plan
Weekly Expected Option Move Hit...What's Next?
I am happy to see FOMC behind this. These days along with CPI are some of the toughest days to trade and profits when available should be locked up as reversals can quickly happen.
Nothing major out of FOMC minutes besides a few FED officials wanting to increase rates by 50bps instead of 25. The FED is in a hard spot and until we see further decreases in inflation and an increase in unemployment this battle is far from over. The pivot everyone seeks is hard to see…
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
GDP and more FED…
8:30am est - GDP
10:50am est - Atlanta Fed's Raphael Bostic speaks
2pm est - San Francisco Fed's Mary Daly speaks
For more information on these news events, visit the Economic Calendar
SPX Notes:
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 - We broke down from this trend, but closed right on it. Based on futures we could gap back within this trendline
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
White - this other white line I am going to bring back which is the down trendline from the ATH’s in January 2022 that we broke in this recent rally
We do have a gap to fill to the upside in that 4071 level
Weekly Option Expected Move
We hit the downside target of our weekly option expected move and immediately saw some reaction near this level to close above it. SPY on the other hand closed below the expected move. Continue to pay attention to these levels…
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:
Remember you can use this SPX trade plan to trade ES or SPY.
Bullish bias:
Above 4000 target 4015-20
If there is a failed breakdown at 3985-90 target 4015
I would only consider this scenario in the first hour of trading and not as a trade idea post it
I would be cautious of any longs above 4020, may see 4050 max, but the R/R is high risk
Below 3980 target 3965
If there is a failed breakout above 4000 or 4015-20 target 3985 then 3965
If there is a breakdown of 3950 target 3925
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.
As many of the greeks rely on volatility I want to look at the VIX chart and call attention to the trendline we gapped above and the gap it left. If bulls have any shot of price moving up they will want to see VIX retest the trendline it broke out from or fill the gap.
Vanna - Levels where price may repel or act as magnet
Remember for price to go above spot through a magnet or repellent VIX and IV must decrease or stay flat. For price to go below spot through a magnet or repellent VIX and IV must increase.
Above Spot:
4000 is a major negative vanna - acting as a repellent
We want to see a decrease in VIX in order for price to flow pass this repellent
4015-4045 is a cluster of negative vanna - acting as a repellent
4030 is our largest negative vanna
Will need to see a decrease in VIX to zip past this cluster
4050 is a minor positive vanna - acting as a magnet
If we can get through the negative vanna’s this will where price will gravitate to
4065 is a major positive vanna - acting as a magnet
Below Spot:
3980 is a minor negative vanna - acting as a repellent
In order for price to get through this level/support VIX will need to increase
3975-3965 is a cluster of positive vanna - acting as a magnet
3960 and 3950 are negative vanna - acting as repellents
3945-3925 is a cluster of positive vanna - acting as magnets
Our range could be 3965-4050
Vanna shows us that we have a higher pull at the 4065 level than we do to any downside levels
4000 is a key negative vanna that will need VIX to decrease in order to pass and hold it
Hard to see how Vanna takes the bulls above 4015-25
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
4010 is positive Gamma - acting as resistance
4050 is positive Gamma - acting as resistance
4065 is positive Gamma - acting as resistance
Price above 4000 will increase dealer selling pressure to allow the dealers to hedge - again it is not a large amount
Below Spot:
3990 is positive Gamma - acting as support
3980-3990 are positive - acting as support
3960 is positive Gamma - acting as support
3950 is positive Gamma - acting as support
Price below 3970 will increase dealer selling pressure until 3950
4065 will be a major barrier to get past for bulls
3980 is a major level and if lost takes us towards 3960
Bears will want below 3950 to target 3920
QQQ Trade Plan
Unfortunately, I didn’t have time for a QQQ plan. I will bring this back next week.
Final Take
Just looking at futures you would say a rally is happening/will happen. While true and we can see a push up higher the bears are more favored from a seasonality standpoint through the rest of the month. I think the best R/R is finding an entry for puts to swing into next week. Wait for confirmation, but we could see tight ranges the remaining of the week so lock in profits as you see fit and avoid any green to red PnL scenarios.
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.