March 7, 2023 SPX, SPY, ES Trade Plan
Not so fast says the Bear
Good evening traders. What an interesting day in the markets.
Last session trading recap
We had two trade ideas that panned out:
If there is a breakout of 4055-60 target 4075
If there is a failed breakout above 4075 target 4060
On the first trade the opening 5 min candle was your entry - again I typically don’t trade until about 9:45-10am est. While this trade looked good it is going against one of my trading strategies. So I avoided…but congrats to those who took it.
From there I paytiently waited until price gravitated towards 4075. Now how did I feel confident with taking this short - I tweeted here, here, and here to watch for shorts - and boy were we rewarded with a 30pt selloff.
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
Today brings us…
Stay nimble, be careful, and manage your risk around this event.
10am est - Fed Chair Powell Testifies - Live Stream
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 4080 target 4100
If there is a breakout of 4060 target 4070-75
If there is a failed breakdown of 4010 target 4035
Bearish bias:
Below 4040 target 4015
If there is a breakdown of 3990 target 3965
If there is a failed breakout above 4110-15 target 4080
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:
4085-3917
We currently sit in January’s Value Area
4054
We are chasing February’s Value Area Low
Currently price is rejecting this area - this should be a key level to be on the lookout for
4085
This is January’s Value Area High
A key critical level if the bulls want to continue higher or if sellers reemerge
4180
This is February’s Value Area High
A key critical level if the bulls want to continue higher or if sellers reemerge
Weekly Levels:
4003
This is the 2/27 Weekly Value Area High
Could be a potential area for a retest and if holds a nice long opportunity
4027
This is the 2/21 Weekly Value Area High
Price could magnet to this VA if we are to not take out 4098
4098
This is the 2/13 Weekly Value Area Low
Price has rejected or avoided this area so far
4136
This level holds major weight
It is a naked point of control - hasn’t been tested and is a POC on the weekly and monthly volume profile
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.
4029-4048
We broke out of this LVN, but came back to test it and currently sit within it
This means we could go down just as easy as we can go up
4081-4089
This is the next LVN to the upside and where price could act as supply
4145-4157
Another LVN to the upside where price could act as supply
4018-4023
Could act as support
3983-3974
Trendlines
No major changes to our trendlines.
Orange - This is now our resistance trendline
Purple - This trendline is from our October 2022 lows
White Solid - this trendline is the down trendline from the ATH’s in January 2022
White Dotted - This is the Covid low trendline
We have gaps to fill at 4071, 4089, and 4218
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.
VIX Update
Let’s review the VIX chart. The VIX continues to hold the demand zone at 18.30-18.05. If this demand zone holds we should see 20.24 as our next target on the VIX.
If we cannot hold the 18.30-18.05 order block, expect the VIX to test the orderblock at 17.30-16.93. Below that we see 15.44-14.95.
Above, 18.96-19.44 could provide resistance followed by 20.25-21.03.
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:
4050 is a positive vanna - acting as magnet
4055-4060 are negative vanna’s - acting as repellent
4065-4070 are positive vanna’s - acting as magnet
4075 is a negative vanna - acting as repellent
4080-4110 are positive vanna’s - acting as magnet
In order to get through this area we need VIX to decrease
4115-4120 is a negative vanna - acting as repellent
On the line graph, vanna is positive above 4060 all the way to 4145
Below Spot:
4045 is a positive vanna - acting as magnet
4040 is a negative vanna’s - acting as repellent
4035-4015 are positive vanna’s - acting as magnet
4010 is a negative vanna - acting as repellent
4005-4000 are positive vanna’s - acting as magnet
3995 is a negative vanna - acting as repellent
3990-3965 is a cluster of positive vanna’s - acting as repellent
On the line graph, vanna is neutral until 4030 and becomes positive at 4025
This means price will magnet more to the downside as we break 4030
Gamma and Delta-Adjusted Gamma (DAG)
First of all what really stood out to me in Gamma was the massive towers above spot at 4050, 4065, and 4100.
Then, the other thing that popped out was all the negative gamma below spot especially the range from 4025-4000. What does this mean? 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 fast/quickly, just that dealers won’t impact the move
Above Spot:
4050 is a positive Gamma - acting as resistance
4065-4070 is positive Gamma - acting as resistance
4085-4100 is positive Gamma - acting as resistance
4125-4130 is a positive Gamma - acting as resistance
No price level shows dealer buying pressure unless price gets above 4170
Below Spot:
4040 is positive Gamma - acting as support
4030 is positive Gamma - acting as support
4025-4015 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 fast/quickly, just that dealers won’t impact the move
4010 is positive Gamma - acting as support
3995 is positive Gamma - acting as support
3960 is positive Gamma - acting as support
All price levels show an increase in dealer selling pressure
Charm
Charm has taken a more bearish tone on SPX, but I would declare it more neutral than bearish. This could suggest selling pressure tomorrow.
When reviewing Charm we also need to account for SPY’s charm. It is leaning bullish. 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 with a gap down or bears putting pressure on the bulls.
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. No clear signs that price wants to move to one side or the other. It all comes down to Powell.
I hate trading days like these, but if you are going to trade manage your risk. Expect quick whipsaws as the testimony starts and continues. To play it safer trade smaller sizes or wait paytiently for the testimony to end.
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.