March 3, 2023 SPX, SPY, ES Trade Plan
A classic battle between bears and bulls...
Hello fellow traders and team. Today’s trade plan comes a bit late, but it is here none the less.
My only trade yesterday was my overnight swing from the previous trading in some SPX puts. Got to opening with a nice gap down and closed the trade for profit.
We had two trade ideas work. The selloff into 3935 and near 3925 and then going lolng on the failed breakdown of 3925 targeting 3940, but we got all the way to 3990 so congrats if you were able to take this failed breakdown.
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
Light news events today…
9:45am est - S&P Global U.S. services PMI (final)
10am est - ISM Services PMI
11am est - FOMC Member Logan Speaks
3pm est - Fed Gov. Michelle Bowman speaks
For more information on these news events, visit the Economic Calendar
SPX Notes:
No major changes to our trendlines we continue to have price hover between our January 2022 ATH down trendline and the October 2022 trendline from the lows of the year.
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 3995, but wouldn’t be shocked if Gamma takes us to 4030 if we get momentum
Set stop losses close or take profits when available if you are going long
If there is a failed breakdown of 3950 target 3965
If there is a failed breakdown of 3890-3900 target 3910-15
Below 4000 target 3975
If there is a breakdown of 3970 target 3955
If there is a failed breakout above 4025-30 target 4000 then 3980
VIX Update
Let’s review the VIX chart. Basically fear in the markets deflated yesterday…We quickly sold off to 19.60. We closed the gap fill that was unfilled. Where to next? Most likely more down before we have any shift and where to?
We have room down to 19.21 then 18.86 then 18.5.
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:
4000 is a major negative vanna - acting as repellent
4000-4025 is a cluster of negative vanna - acting as repellent
In order to get through this area we need VIX to decrease
4030-35 are positive vanna’s - acting as magnet
4050 is a positive vanna - acting as magnet
4065 is a positive vanna - acting as magnet
On the line graph, vanna is negative above spot - meaning Vanna will NOT drive price up, but other greeks like Gamma will - similar to yesterday
Below Spot:
3980 is a minor negative vanna - acting as repellent
3975-3955 is a cluster of positive vanna - acting as magnet
3970 is a minor negative vanna - acting as repellent
3965-3955 is a cluster of positive vanna - acting as magnet
3950 is a negative vanna - acting as repellent
3945-3920 are positive vanna - acting as magnet
3915 is a negative vanna - acting as repellent
On the line graph, vanna is neutral until 3950 - meaning Vanna will NOT drive price down, but other greeks like Gamma will - similar to yesterday
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
3995 is a positive Gamma - acting as resistance
4000-4025 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
4030 is a positive Gamma - acting as resistance
4035 is a positive Gamma - acting as resistance
4050 is a positive Gamma - acting as resistance
4065 is a positive Gamma - acting as resistance
Price above 3995 will increase dealer buying pressure
Below Spot:
3975-3955 is a cluster of 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
3950 is positive Gamma - acting as support
3945-3920 is a cluster of 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
3915 is positive Gamma - acting as support
3910 is positive Gamma - acting as support
Price below 3980 will increase dealer buying pressure
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.
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 today and next week.
Final Take
Based on where futures are at we should see a gap up, but be careful with longs. Could be a reversal of the past week or so where we gap down and then rally to end the day. Today could be gap up followed by a sell off. Let’s keep an eye on the levels those key levels will be…
3995/4000
4030
3975
3955
I would pay closer attention to the Gamma levels. From the 3/1 and 3/2 trade plan I mentioned Gamma levels will play a critical level. Yesterday we mentioned if price gets above 3965 it will require dealers to partake and that’s why we got the massive push we got.
Remember, until next week, Vanna plays a lesser role in what the market does. Dealers are more hedged or have to hedge much less…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.
Really liking the content and how you're including charm as well! Easier to grasp than most content that is out there on the same subject.
Appreciate your daily layout. You (and kevin F) bring Jasons data to an application level for me. - mike