/ES (SPY) Gap Fill Long with Confluence/Odds Enhancers!
While wariness remains re: larger timeframe structure for US equities (+ continued weakness in US gov’t bonds, USD strength), we are stalking near/intermediate-term longs via downside futures gaps in both the ES and NQ. The YM and, to a lesser extent RTY, are also approaching possible buy zones, thus bolstering this trade’s attractiveness.
While the primary premise of the trade is filling the downside gap into “demand”, odds are enhanced via the trendline and anchored VWAP, which coincide with ~4300 (major psychological #). When placing equity index futures trades at LionHart, we closely watch potentially correlated markets (VIX, DXY, ZF/N/B…). Volatility has had a nice move alongside the downdraft in stocks, but may be a bit overaccelerated as it approaches “supply” (red lines). If equity indexes fill downside gaps and pierce buy zones, watch the VIX and other related markets for reversal signals.
Regarding trade concerns/targeting, we sometimes prefer subjective target/trade management via small timeframe charts; that methodology will be applied here. New overhead supply has formed ~4360 and traditional resistance traders may defend ~4340-50, so trade profit margin is not ideal. Given that equity markets have a bullish bias, though, we still believe capital is worth deploying. If you can purchase multiple contracts, consider scaling ahead of the abovementioned levels and hold runners if prices press higher. The red zones = supply, where unfilled sell orders remain.
Thank you for reading, thoughts/feedback welcome, and good luck/happy trading!
Jon
While the primary premise of the trade is filling the downside gap into “demand”, odds are enhanced via the trendline and anchored VWAP, which coincide with ~4300 (major psychological #). When placing equity index futures trades at LionHart, we closely watch potentially correlated markets (VIX, DXY, ZF/N/B…). Volatility has had a nice move alongside the downdraft in stocks, but may be a bit overaccelerated as it approaches “supply” (red lines). If equity indexes fill downside gaps and pierce buy zones, watch the VIX and other related markets for reversal signals.
Regarding trade concerns/targeting, we sometimes prefer subjective target/trade management via small timeframe charts; that methodology will be applied here. New overhead supply has formed ~4360 and traditional resistance traders may defend ~4340-50, so trade profit margin is not ideal. Given that equity markets have a bullish bias, though, we still believe capital is worth deploying. If you can purchase multiple contracts, consider scaling ahead of the abovementioned levels and hold runners if prices press higher. The red zones = supply, where unfilled sell orders remain.
Thank you for reading, thoughts/feedback welcome, and good luck/happy trading!
Jon
Comment:
ES has breached the proximal line of our highlighted demand zone! Watch for reversal signals using small timeframes. Volatility (VIX) continues to press higher and has formed a fresh/insulating 60-minute demand (18.50-18.75), so be careful. Despite entering our zone and filling the gap, we're being conservative and haven't yet established a position; the VIX may want to continue to the higher supply zone (~20-20.81), which would suggest add'l S&P downside, plus the NQ still has further to fall before filling its downside gap. Good luck!
Comment:
Signs of nibbling buyers. Consider establishing a starter position depending on risk tolerance. Looking for ES to close above 4305/6.25 as a signal of abating distribution. We'll see what it has in the tank...
Comment:
Meant to mention, ES daily "rally-base-rally" demand = 4268.50-4292.25. We think it's more likely vs. not that the S&P will press lower into this area, but it's a bit of a toss-up. Stay nimble and use your judgement!
Jon
Jon
Comment:
"Meant to mention, ES daily "rally-base-rally" demand = 4268.50-4292.25." = aged well.
JHart
JHart
