2/28 SPX, SPY, ES Trade Plan
Kangaroo Market To Stay...
Hello team. We had another successful trading day - while we gapped above our levels from the trading plan, I will use my Twitter to provide any updates to the plan that I believe is needed and today was that day.
At 8:46am est I tweeted the below (my screenshot shows one hour ahead as I am on vacation) that I was still not sold on this rally.
I then tweeted at 8:51 am est this item on $VIX and provided some key levels of support…
With these two pieces of information this should have given you the “signal” to #paytiently wait for the setup and attack. I #paytiently waited, didn’t top tick it, but added near the top again and ran off with almost $1,000 in profit today.
As a reminder…
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News Catalyst
Key news events will determine the markets trend pre and post market open…
8:30am est - Canada GDP
8:30am est - Advanced retail inventories
8:30am est - Advanced wholesale inventories
9am est - S&P Cash Shiller home price index (20 cities)
10am est - CB Consumer Confidence
2:30pm est - Chicago Fed President Goolsbee speaks
For more information on these news events, visit the Economic Calendar
SPX Notes:
We tested our purple trendline from the October 2022 lows, pushed above it, sucked longs in and immediately broke back below it. This naturally puts the white trendline from the Jan 2022 ATH’s as the next likely destination…
Orange - This is now our resistance trendline…for any bullish activity to occur it must break above this trendline
Purple - This trendline is from our October 2022 lows - We broke it again, but failed to hold and came back below the trend
White - this trendline is the down trendline from the ATH’s in January 2022 that we broke in this recent rally
We have two gaps to fill at 3971 and 4071
Our gap at 4010 was closed today
Weekly Option Expected Move
SPX’s weekly option expected move is ~77.06 points. SPY’s expected move is ~7.65. Remember over 68% of the time price will resolve it self in this range by weeks end.
There was a nice spike of puts at the end of the day - note I am one hour ahead of EST - not a crazy amount (~ $17M), but worth an eye to see where price goes. See the below screenshot courtesy of Quant Data…
Again, let’s not predict, let’s jump into the data and build a trading plan reacting level to level.
SPX/ES/SPY Trade Plan:
Remember you can use this SPX trade plan to trade ES or SPY.
Bullish bias:
I would be cautious of any longs above 3990 - IF we were to even get there - the R/R is high risk and not worth it - instead look for key breakdowns that fail
If there is a failed breakdown of 3950-55 target 3975
Below 3980 target 3955-60
If there is a failed breakout above 3990 target 3955 with a speed bump at 3980
If there is a breakdown of 3950 target 3925
VIX Update
Let’s review the VIX chart. We hit the trendline we had broken out of, but came back above it, tested it multiple times, and then finished the day just above it. I still have 20.50 and 20.20 as key levels on the VIX. We did lose support at 21.30. If you are bearish on the market you will want VIX to take this level back.
To the upside 21.55 will be a key resistance level and then 21.78.
Remember, typically VIX going down correlates with a uptrend in the market and vice versa for a downtrend in the market.
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 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:
3990-4020 is a cluster of negative vanna’s - acting as repellents
In order to get through this area we need VIX to decrease
4025 is a minor positive vanna - acting as a magnet
4040-4060 is a cluster of negative vanna’s - acting as repellents
4050 is a minor positive vanna in this cluster
Below Spot:
3980 is a minor negative vanna - acting as a repellent
3975-3955 is a cluster of positive vanna - acting as a magnet
In order to get through this area we need VIX to increase
3950 is a minor negative vanna - acting as a repellent
3945-3935 is a cluster of positive vanna
3930 is a minor negative vanna
3925-20 are minor negative vanna’s
3915-10 are minor negative vanna’s
Our vanna range could be 3955-3990
Vanna indicates price has little room up above 4000
Hard to see how Vanna takes the bears below 3930
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
3990-4020 is negative Gamma
Since this zone has no dealer hedging requirements, the market is able to move freely in between it
4025 is positive Gamma - acting as resistance
Price above 3995 will increase dealer buying pressure
Below Spot:
3980-3955 is negative Gamma
Since this zone has no dealer hedging requirements, the market is able to move freely in between it
3950 is positive Gamma - acting as support
3925 is positive Gamma - acting as support
Price below 3975 will increase dealer selling pressure till 3955
3995 will be a major barrier to get past for bulls
3950 is a major level and if lost takes us towards 3930-25
We are currently trading in a cluster of negative Gamma and this is why you are seeing price freely move between 3955 to 4020 and it will continue to do this until we see more positive Gamma levels in this range
Gamma suggests more kangaroo style market
Final Take
I think we could have another kangaroo like trading day where price floats one direction, reverses in another direction. The Gamma data is clearly articulating this and one of the key levels at 4025 or 3950 will need to break to set us up for the next sustained run or leg.
Remember, typically until tomorrow and it ramps more into next week, Vanna and Gamma play a lesser role in what the market does. Dealers are hedged…so that means whatever the customers (institutional or hedge funds or retail) do the market will freely move until we hit one of those key Gamma levels.
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.