March 10, 2023 SPX, SPY, ES Trade Plan
Down goes the banking sector...
Good evening traders. Well that was one heck of a sell off…After the news on the SVB broke the markets just continued to keep on selling - and boy did they sell off with the SPX losing close to 1.85% of its value.
Tomorrow brings us another volatile day with non-farm employment numbers and avg hourly earnings. Keep an eye out for these news catalysts as they will drive the markets fortunes or misfortunes…
Last session trading recap
I was ill, so didn’t have the ability to trade today nor come up with a game plan, but I outlined in the below tweet an amazing SPY trading plan provided by Captain Wick.
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
We have all pre-market news catalysts for tomorrow.
8:30am est - Non-farm Employment Change & Unemployment Rate
8:30am est - Average Hourly Earnings
For more information on these news events, visit the Economic Calendar
SPX/ES/SPY Trade Plan
Remember you can use this SPX trade plan to trade ES or SPY.
Bullish bias:
Above 3925 target 3950
If there is a breakout of 3960 target 4000
VIX must be decreasing in order to take this trade and take profits while you can or bring those stop losses tighter in
If there is a failed breakdown of 3900-3910 target 3935
Bearish bias:
Below 3915 target 3900
If there is a breakdown of 3900 target 3880
If there is a breakdown of 3865 target 3850 then 3840
SPX - The Why Behind the Plan
Volume Profile
Let’s review the volume profile and some key levels there. If you are unfamiliar with the Volume Profile I highly suggest reviewing some YouTube videos or reading this quick overview on it.
Monthly Levels:
3917 - Currently we sit still in January’s value area - albeit we closed right on the value area low
3830 - Below January’s VAL, we have a point of control sitting from December
4054 - February’s VAL
Weekly Levels:
3892 - a POC sitting here from January 9, 2022
3852 - VAH from 1/3
3947 - for bulls to regain control it starts here
Low Volume Nodes:
These are important as they are typically where money maker’s or larger institutions come in. They typically will direct a reversal acting as support or resistance.
3922-3911
3781-3768
4054-4066
Weekly Option Expected Move
SPX’s weekly option expected move is ~77.66 points. SPY’s expected move is ~7.85. Remember over 68% of the time price will resolve it self in this range by weeks end.
We blew right past it today…will MM’s draw us back up or will we continue to go down?
VIX Update
Let’s review the VIX chart. Simply stunning how majorly the VIX went up today. We blew past a few bearish fair value gaps before finding supply at a key down trendline and a fair value gap.
If VIX continues to go up we could see it find resistance first at 23.88, 24.55, 25.20, 25.43, and 25.77.
This area is a hard resistance for VIX, but should it get above it will target near 27 and then 30.
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:
3920 is negative vanna - acting as repellent
3925 is positive vanna - acting as magnet
3925-3935 is a cluster of positive vanna
3950 is negative vanna - acting as repellent
3940-3955 is a cluster of negative vanna
3960 is positive vanna - acting as magnet
4000 is negative vanna - acting as repellent
3965-4000 is a cluster of negative vanna
4065 is positive vanna - acting as magnet
If price is to push up, it won’t be due to vanna - vanna clear shows a very bearish trend and it will be hard for it to push price up unless we get a much lower reading on VIX
Below Spot:
3915 is positive vanna - acting as magnet
3900 is negative vanna - acting as repellent
3910-3880 is a cluster of negative vanna
3880 is negative vanna - acting as repellent
3910-3880 is a cluster of negative vanna
3875 is positive vanna - acting as magnet
3870 is negative vanna - acting as repellemt
3865 is positive vanna - acting as magnet
3850 is negative vanna - acting as repellent
3860-3840 is a cluster of negative vanna
Interesting enough there is a lot of negative vanna to the downside as well. That cluster until 3880 could act as support and should we get a good NFP that could push price up. If price does fall it won’t be vanna leading us unless we see a major increase in VIX.
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
3925 is a positive Gamma - acting as resistance
3925-3935 is a cluster of positive Gamma
3960 is a positive Gamma - acting as resistance
4005 is a positive Gamma - acting as resistance
4065 is positive Gamma - acting as resistance
4100 is positive Gamma - acting as resistance
Dealers must buy above 3950
All other levels within these ranges are negative Gamma. This means no dealer hedging requirements are necessary. So price can move freely up and down these negative Gamma levels.
Thus price could find itself pinned between 3895-4065
Below Spot:
3900 is positive Gamma - acting as support
3915-3900 is a cluster of positive Gamma
3880 is positive Gamma - acting as support
3890-3880 is a cluster of positive Gamma
3870 is positive Gamma - acting as support
3850 is positive Gamma - acting as support
3860-3840 is a cluster of positive Gamma
Dealers must sell between 3925-3945
This means a move into these levels could face additional resistance
There are plenty levels here in Gamma to act as support, but if we lose them it continues our ride down. So play these level by level and see how price is reacting along with VIX.
Charm
Charm has taken a more bearish tone on SPX and SPY. It is heavily skewed to the bearish or positive total value on SPX which could suggest more selling pressure tomorrow.
When reviewing Charm we also need to account for SPY’s charm. It is leaning bearish. Between the totals of SPY and SPX, SPX charm will outweigh SPY.
Keep in mind the total notional value of SPX should be multiplied by 10 for comparison to SPY.
Final Take
Based on the data tomorrow is a 50/50 toss up with NFP data awaiting us. No clear data signs that price wants to move to one side or the other. It all comes down to the data at premarket.
What I am also going to be paying attention to is how the financial sector and regional banks sector are performing. XLF for example lost ~ 4.06% of its value today. Will further negative news on banks make there way or is this problem specific to SVB?
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.