March 16, 2023 SPX, SPY, ES Trade Plan
Up or Down; Contagion or Not?
Good morning traders. Had a few personal conflicts yesterday and was unable to provide a trading plan last night, but here we go.
Last session trading recap
Unless you were an overnight ES trader, yesterday was a very frustrating trading day. The entire move occurred overnight while we were sleeping and when I woke up this morning I couldn’t find the best opportunities.
We opened at 3865 and pushed towards 3873 where I tried to enter a short, but couldn’t get filled and just as quickly the trade went towards 3860 and a bounce out of 3850 price target.
There is ~ 252 trading days in a given calendar year. For the first time in some time we need to realize the entire trade plan was exeucted overnight and that as the market opened it would chop with no real breakouts or breakdowns and just trapping traders as it went up and down.
These are amazing days for technical scalp traders…this is not my game, but excited for any of our ES traders who ate last night with this amazing draw down. All of our downside/bearish bias trades hit.
As a recap they can be found in the below posting.
One of my key intraday tools I use is Quant Data. I have a 7-day free trial I can provide by following this link. Two key features they provide is the Net Flow and Options Exposure by Strike - both updated in real-time. This helps seeing the other side of the picture as the Volland data provides us dealer positioning where as Quant Cast shows us what institutions and retail - aka the customers - are doing. Try it yourself and reach out with any questions and visit the Quant Data YouTube for more tutorials.
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
8:30am est - Philly Fed Manufacturing Index
8:30am est - Unemployment Claims
9:15am est - EU Monetary Policy Statement
9:45am est - ECB Press Conference
For more information on 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 3885 target 3935
If there is a failed breakdown of 3880 target 3935
If there is a failed breakdown of 3850-55 target 3865 then 3880
Bearish bias:
Below 3880 target 3860
Watch for a failed breakdown trap first - safer trade could enter at 3875
If there is a failed breakout of 3935 target 3880
If there is a breakdown of 3850 target 3825 with some support coming at 3840
SPX - The Why Behind the Plan
Bullish Falling Wedge
A key wedge I want to see how it plays out is this falling bullish wedge into demand on the hourly. We hit the resistance/top line on this yesterday. I will be curious to see if we bleed down more into the demand zone and then attempt a breakout or if that break out comes today.
Something to keep an eye out for…
Weekly Option Expected Move
SPX’s weekly option expected move is ~111.90 points. SPY’s expected move is ~11.86. Remember over 68% of the time price will resolve it self in this range by weeks end.
This should just be used as another data point. Most times than not price will end the week within this range, but when unaccounted news events occur - such as SVB failing - the expected move should be a muted data point then.
VIX Update
Let’s review the VIX chart. Had a huge push up on the breaking news of the Credit Suisse saga and then the rest of the dad it just chopped around until the end of the day it came back in to test that demand zone near 25.42.
Right now we have resistance in that 30-31 level and demand zones below us. One side gives or what most likely will occur is you will see VIX just bounce like a kangaroo in this level until it finds its footing.
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:
3895-3935 is a cluster of positive vanna - acting as magnet
3925/3930 could be nice price targets with the largest vanna’s sitting here
3940-3955 is a cluster of negative vanna - acting as repellent
3960 is positive vanna - acting as magnet
3965-4000 is a cluster of negative vanna - acting as repellent
Below Spot:
3895-3885 is a cluster of positive vanna - acting as magnet
3880 is negative vanna - acting as repellent
3875-3860 is a cluster of positive vanna - acting as magnet
3855-3840 is a cluster of negative vanna - acting as repellent
3825 is a LARGE positive vanna - acting as magnet
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
3885-3890 are positiive Gamma - acting as resistance
3910-3935 are positive Gamma - acting as resistance
3960 is positive Gamma - acting as resistance
Dealers must buy above 3895
Below Spot:
3880 is positive Gamma - acting as support
3855-3850 are positive Gamma - acting as support
3840 is a large positive Gamma - acting as support
Dealers must sell below 3880
Charm
Charm is neutral on SPX. This suggests that Charm will have little to no impact in its current state for today’s session.
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
Today based on vanna levels could bring us a balanced trading day. I believe in general as long as we avoid any more news surprises that we will be trading range bound until next weeks FOMC meetings.
We do have some key critical EU monetary policy updates coming our way pre and post market open so this will be our key news catalyst for the day. Be on the lookout for this.
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, Quant Data 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.