January 11, 2024 SPX, SPY, ES Trade Plan

Market Recap

Hello team and what a great day was it to be a bull. I was exploring fintwit today and noticed a few conversations of how tough today’s price action was and missed opportunities and so forth…For those who were with us in the chat room we were on the right side of this and if you had paytience and stuck to my guidance throughout the day in the chat room you walked away handsomely!

How the Dark Matter Trade group felt after today’s bond auction

Our trade plan called for the below trade ideas and I want to focus on them to help you with your trading execution.

1. Above 4765 target 4775-4780

2. If there is a failed breakout of 4760-4765 target 4750

3. Below 4750 target 4740-4735

Alright so the trading day opened 4759 going as high as 4770. Did I trigger going long on trade idea 1? No I didn’t. As I stated in my trading rules on non-event days with no premarket news I want to give price time to balance and find its edges - support and resistance zones and compare them to ES futures... Doesn’t mean the trade idea is now done with and invalidated - it is just that I want to have confirmation. How do we get that? Flipping between timeframes - even though the 5 min chart closed above 4765 the next two candles after it showed exhaustion if you looked at the 15min candles it would make you hesitate and wait for further confirmation. Additionally, if you look at the volume coming in on the 5min chart it spiked and continued to come down. If I see a spike like that usually I want to see that key level hold before I considering going long.

Last but not least is the 0DTE options flow. I keep hammering this and as the expansion of 0DTE options in the market it IMO has been used by institutions to hold the market or hedge other positions while returning a nice return. At 9:30am we had no confirmation and as the market shifted we still had no confirmation to go long. It wasn’t until about 9:45am when the options flow started to show a bullish bias even though we were selling off.

Now did I trade idea 2? No. Too early in the trading day again. Looking at the options premiums I didn’t see any interest as the premiums were not moving as much as they should when it is going in the direction of said trade. Additionally, 0DTE options flow showed no signs of a major selloff with 4750 heavily supported. In other words unless you can close trades super quick as it neared 4750 it could reverse at any point. That’s exactly what we got where price held firm at the 50ema on the 5min chart and immediately found buyers.

Now let’s say you did go long on that initial break of 4765 as long as you didn’t trade a 0DTE expiry and played at minimum 1-2 days if not a weekly your draw down would have been minimal. Knowing that 4750 was a firm support zone that would have been my last LIS as the selloff from 4750 would have taken us all the way down to 4735.

To add this is why I hammer often to you all avoid 0DTE’s. I know how enticing they are and the instant gratification they can provide when they go your way, but more times than not you will be burned. If this is you do me one favor…change your trading strategy and buy at least a 1DTE for the next few trading days and let me know if your emotions are more in check…

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Continuing our recap we also shared that tomorrow’s catalyst was in the afternoon and this was going to be the first lunch hour I trade in some time. I went long after the next break of 4765 and even though we sold down a bit and consolidated the decay on a 0DTE would have killed you. Finally after the bond auction price spiked, sold off, but what key level did it then hold?

4765!

What was resistance turned into support and we slowly pushed our way up where after 4776 broke the market found a zone of liquidity and you can see how fast it spiked to 4780…

We do have a catalyst today and it is at 1pm and that is the 10-year bond auction. This will be the one trading session where I will be paying closely to the market and charts during the lunch hour.

Beautiful end to the day and we can continue our green days and onto the next trading session where we have CPI, but also another big one the 30-year bond auction.

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Back to red on the BPSPX…swing trade is forming folks.

Back to red on the daily chart of the BPSPX

Let’s bookmark this image and come back to it each month…

SPX Monthly Performance During Election Years

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