March 20, 2023 SPX, SPY, ES Trade Plan
Key FOMC Lies Ahead This Week
Good evening traders. This week’s fun brings us FOMC and it will surely move the markets one way or another.
For some prediction talk, I personally DO NOT see the FED raising to 50bps. I also DO NOT see the FED stoping or pivoting and even pausing. Inflation is still at 6% CPI and the FED’s goal from the beginning has been getting it back to the 2% level - not going to use the time here to opine if that will happen…
On top of that, typically when the FED pivots or pauses damage to the economy and markets has fully occurred and I don’t think we are quite there. Is it starting to unravel - of course, yet employment numbers are quite strong, earnings season wasn’t as bad as what many expected, thus let’s see how the next few weeks and into Q2 tech ER’s how the market and economy react.
Reminder, this is an unusual trading month where we have an additional week of weakness that is not supportive of Vanna and Charm. So pay extra close attention to the Gamma levels and any key volume profile value area’s and point of controls., along with bullish/bearish orderblocks. They might provide us a better story than Vanna for the next 2 weeks.
Last session trading recap
Another great trading plan and with it a selloff began right after our “half hour” no trade zone ended. I continue to be amazed how these levels react within the hour and even sometimes at the start of the trading day. I am going to continue to hold or wait towards the end of the first half hour of trading, but I have been backtesting some of our levels/trade plans and taking trades sooner have still paid out. Be on the lookout as I continue to test this.
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
No news events…
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 3930 target 3945
If there is a failed breakdown of 3910-15 target 3930 then 3945
I only want this trade in the morning IB - initial balance - first hour of trading - otherwise it is a riskier trade to take
If there is a failed breakdown of 3890 target 3905
I only want this trade in the morning IB - initial balance - first hour of trading - otherwise it is a riskier trade to take
Bearish bias:
Below 3930 target 3915
If there is a breakdown of 3910 target 3895
If there is a failed breakout of 3930-35 target 3915-10
SPX - The Why Behind the Plan
Dark Pool Levels
We need to pay attention to some key levels that have Dark Pool buildup. Right now these are resistance levels and some have been for some time so continue to monitor these levels and if we do go through one of these levels it could be these larger institutions ending their shorts. Note these levels are given in SPY levels and converted to SPX (SPY price multiplied by 10.04)
3960 - (394.46) on Friday reported $3B worth of activity
394.12 - An additional $4B was added previously at this level
3915 - (390.11) $3.7B was reported at this level
We are right at this level - will be curious to see if this pool ends up being a short or longing - based on previous Dark Pools you could argue this most likely will be a sell/short - let’s wait and see
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 near January’s value area low - albeit futures overnight currently has us back in inside the value area
This is also March’s POC - point of control - where the most activity has occurred at this level
3852 - this is March’s value area low
3771 - this is December’s value area low (VAL)
3675 - this is a naked POC from October 2022 - we haven’t tested this POC since it formed
3964 - this is March’s value area high
Note we have rejected this level twice on the daily timeframe and will be a key level for the bulls to take back
4054 - this is February’s value area low
4085 - this is January’s value area high
Weekly Levels:
3916 - last week’s sessions POC
3892 - 1/9 POC
This is a key level as we created an imbalanced volume profile on the weekly to the upside only to be sucked back in - if this is lost we continue to seek the lower areas of this weekly profile
3867 - 3/13 value area low
3934 - 3/13 value area high
Weekly Option Expected Move
SPX’s weekly option expected move is ~121.23 points. SPY’s expected move is ~12.03. 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 could be a muted data point then.
VIX Update
Let’s review the VIX chart. VIX held its demand zone Friday and sparked a rally out of it netting a red Friday for the SPX.
Currently we are seeing the 23.06-21.79 act as demand and 30.55-31.00 act as supply.
Short term VIX needs to break out of the supply zone of 26.11-27.30. If this supply zone acts as resistance immediate support comes in at 24.35-23.29. If the VIX continues to chop in this area we will see more chop in the SPX. When one of these levels break is when we should see a trend within the SPX.
Long term we have demand at 19.30-18.90. The next supply zone is 32.23-32.65.
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.
As we are in a window of weakness with Vanna we cannot solely rely on these levels. It is imperative that for the next two weeks we look at key Gamma levels, orderblocks, and the VIX.
Above Spot:
3925 is positive vanna - acting as magnet
3935 is positive vanna - acting as magnet
3945 is positive vanna - acting as magnet
3950-4000 is negative vanna - acting as repellent
4005 is positive vanna - acting as magnet
4015 is positive vanna - acting as magnet
4030 is positive vanna - acting as magnet
Below Spot:
3915-10 is negative vanna - acting as repellent
3905-3895 is positive vanna - acting as magnet
3890-3875 is negative vanna - acting as repellent
3865 is positive vanna - acting as magnet
3860-3830 is negative vanna - acting as repellent
3965-3880 is what it seems like Vanna wants to pin us - any value above or below it faces negative vanna
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
3925 is positive Gamma - acting as resistance
3935 is positive Gamma - acting as resistance
3945 is positive Gamma - acting as resistance
3950-4000 is negative Gamma
If price floats through this zone dealers will not impact price as they are neutral to these levels - no buying or selling
4005 is positive Gamma - acting as resistance
4015 is positive Gamma - acting as resistance
Dealers must buy above 3965
Below Spot:
3920-3900 is negative Gamma
If price floats through this zone dealers will not impact price as they are neutral to these levels - no buying or selling
3895-3870 is positive Gamma - acting as support
3860-3830 is positive Gamma - acting as support
Dealers must sell below 3920 till 3880
Charm
While Charm is on “vacation” the next two weeks I will continue to share the data just for observation purposes.
Charm is bearish on SPX. This suggests that Charm will have little a more bearish impact on SPX today.
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. When they are in sync that further adds to the charm impact.
Keep in mind the total notional value of SPX should be multiplied by 10 for comparison to SPY.
Final Take
I first want to recap the key levels I am watching on SPX:
3964 - this is March’s value area high
Note we have rejected this level twice on the daily timeframe and will be a key level for the bulls to take back
3960 - (394.46) on Friday reported $3B worth of activity
394.12 - An additional $4B was added previously at this level
3915 - (390.11) $3.7B was reported at this level
We are right at this level - will be curious to see if this pool ends up being a short or longing - based on previous Dark Pools you could argue this most likely will be a sell/short - let’s wait and see
3892 - 1/9 POC
This is a key level as we created an imbalanced volume profile on the weekly to the upside - if this is lost we continue to seek the lower areas of this weekly profile
Any levels between 3915-3965 could just be chop intraday. Thus take profits when you can and look for these key levels to break in order to get some direction. The loss of 3892 will trigger the next leg down for SPX. The break of 3965 will trigger a leg up for SPX.
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.