March 2, 2023 SPX, SPY, ES Trade Plan
Will the bears keep the pressure?
Hello team. An amazing day was all the better with our overnight puts we took on the failed breakout of 3990. I rode my puts to the open taking profit there and shutting my screens off. Why wouldn’t I wait? I left some money on the table, but I am extremely happy to walk away with $1,600 in profit any day of the week. I didn’t have to sweat it out and stare at charts everyday.
As you refine your trading skills it is not about getting every single trade top and bottom. Aim to get a part of that trade, compound, and wait for the next trade.
Here is a nice recap of the 3/1 trade which was our bearish bias - Below 3970 target 3955.
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
Key news events will determine the markets trend pre and post market open…
5am est - EU CPI
8:30am est - Unemployment Claims
8:30am est - Revised Nonfarm Productivity
8:30am est - Revised Unit Labor Costs
4pm est - FOMC Member Waller Speaks
6pm est - FOMC Member Kashkari Speaks
For more information on these news events, visit the Economic Calendar
SPX Notes:
No major changes to our trendlines, but the white trendline which is our trendline from the ATH’s that we broke is most likely our next destination down
Orange - This is now our resistance trendline
Purple - This trendline is from our October 2022 lows
White - this trendline is the down trendline from the ATH’s in January 2022; we broke above this trendline, but price seems to be making its way back to it
We have one gap to fill at 4071
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.
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 3965 - 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 3925 target 3940
If there is a failed breakdown of 3890-3900 target 3910-15
Below 3950 target 3935 then 3925
If there is a breakdown of 3910 target 3890
If there is a failed breakout above 3965 target 3950 then 3925
VIX Update
Let’s review the VIX chart. No major change here. VIX continues to play in a range between a key critical demand zone or bullish orderblock and a few fair value gaps - bearish - above it.
We are in a chop zone between 19.82 and 21.37. We have also completed a double top.
If this demand zone doesn’t hold then we may target that gap fill at 19.82 and after that 19.21 then 18.90 then 18.54.
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:
3960 is a minor positive vanna - acting as magnet
3965-3980 is a cluster of negative vanna - acting as repellent
In order to get through this area we need VIX to decrease
3985 is a positive vanna - acting as magnet
4000 is a major negative vanna - acting as repellent
Overall cumulative line graph one Vanna shows that price will have a hard time getting over 3970
Below Spot:
3955-3935 is a cluster of negative vanna - acting as repellent
In order to get through this area we need VIX to increase
3925 is a positive vanna - acting as magnet
3920-3910 is a cluster of negative vanna - acting as repellent
3905-3890 is a cluster of positive vanna - acting as magnet
3900 is a major positive vanna
Overall cumulative line graph one Vanna shows that if price stays below 3950 it can float to 3920
Below 3905 the line graph shows price magnet until 3880
Our vanna range could be 3890-3955
4000 continues to be major resistance
Hard to see how Vanna takes the bears below 3890
Hard to see how Vanna takes the bulls above 3965
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
3960 is a positive Gamma - acting as resistance
3985 is a positive Gamma - acting as resistance
4050 is a positive Gamma - acting as resistance
3965-3980 is negative Gamma
Since this zone has no dealer hedging requirements, the market is able to move freely in between it - doesn’t mean it travels up and down freely, just that dealers won’t impact the move
Price above 3965 will increase dealer buying pressure
Below Spot:
3950 is positive Gamma - acting as support
3940 is positive Gamma - acting as support
3925-3910 is a cluster of positive Gamma - acting as support
Price below 3940 will increase dealer buying pressure
3960 will be a major barrier to get past for bulls
3925-3910 are major support levels
Charm
Charm has taken a more bullish tone on SPX - yesterday we were 50/50. This could suggest a relief rally to come in the SPX soon. I would lock in profits tomorrow while you have them to avoid any quick reversals.
When reviewing Charm we also need to account for SPY’s charm. It is leaning neutral. Between the totals of SPY and SPX, SPX charm will outweigh SPY and thus I wouldn’t be shock if we see Charm kick in after our gap down.
Vega
These are the levels where we should expect the highest levels of volatility.
3950
3940
3920
3895
3880
Final Take
Based on where futures are at we should see a gap down. SPX below 3935 will take an increase in VIX and break of key support levels below in order for it to target that 3900 positive vanna.
I would pay closer attention to the Gamma levels. From the 3/1 trade plan I mentioned Gamma levels will play a critical level - see note shared again below - and we had a key Gamma level at 3940 and this was in fact our low of day - specifically 3939. 3940 and the zone of 3925-3910 will play key critical supports.
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.
Bro, not sure if its just me .. I am not able to take profitable trades from the newsletter. Maybe I am too dumb lol. Would you be able to do a video/webinar with some examples? Why/where you entered and exited? I am more of a visual learner. Also, would it be possible for to create a telegram/discord channel where we can see your plays as you take them? Not as an alert service .... but to understand how to use the data. Maybe you can open it to only the subscribers of this newsletter. Thanks for all the effort you put into this everyday!