March 8, 2023 SPX, SPY, ES Trade Plan
March 8, 2023 SPX, SPY, ES Trade Plan
Powell makes his presence felt
Good morning traders. Apologizes for the late trade plan, but had some personal conflicts yesterday.
Last session trading recap
We had three trade ideas that panned out:
Below 4040 target 4015
If there is a failed breakdown of 4010 target 4035
If there is a breakdown of 3990 target 3965
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
10am est - JOLTS Job Openings
1:01pm est - 10-y Bond Auction
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:
I honestly can’t provide any bullish bias here - not to say it doesn’t exist like yesterday when we took 4010-4035 as a scalp and counter trend trade. You have to be quick in/out on a trade like this so I am not going to recommend any bullish bias here today
Bearish bias:
Below 3980 target 3965
If there is a breakdown of 3960 target 3940
If there is a failed breakout above 3995-4000 target 3965
SPX - The Why Behind the Plan
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 we can go 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:
3990-4045 is a cluster of negative vanna’s - acting as repellent
4000 is our largest negative vanna
4065 is a major positive vanna - acting as magnet
4075 is a negative vanna - acting as repellent
On the line graph, vanna is negative all the way to 4100
Below Spot:
3980 is a negative vanna - acting as repellent
3975-3970 are positive vanna’s - acting as magnet
3965 is a negative vanna - acting as repellent
3960-3940 are positive vanna’s - acting as magnet
3935-3925 are negative vanna’s - acting as repellent
On the line graph, vanna is neutral until 3960 and becomes positive at 3955 until 3915
This means price will magnet more to the downside as we break 3980 and 3960
Gamma and Delta-Adjusted Gamma (DAG)
Above Spot:
3995 is a positive Gamma - acting as resistance
4050 is a positive Gamma - acting as resistance
4000-4045 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
Above 3995 will increase dealer buying pressure
Below Spot:
3965 is positive Gamma - acting as support
3960-3940 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
3935-3925 is a cluster of positive Gamma - acting as support
3915-3910 are positive Gamma - acting as support
Below 3980 will increase in dealer selling pressure
Charm
Charm has taken a more bearish tone on SPX. This could suggest selling pressure today.
When reviewing Charm we also need to account for SPY’s charm. It is leaning bearish as well. 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
It seems like we will continue to sell unless Powell projects a more dovish tone today than he did yesterday.
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.