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I’ll do a bit of an extensive recap of the trade I took Friday and why I took it to provide some insights into how, where, and why I choose to interact with the levels/areas for a given day. Feel free to skip, but I think it provides some important insight into why/how I apply context into my decisions as opposed to simply blindly buying or selling a level.
This was a question asked by a subscriber, so I’ll share the answer here. It is first important to understand that I am not a “level to level” trader even through my levels will often I monitor the development of each session (Asia, London, NY) and my interaction with these levels can be completely different depending on the situation. These insights are best gleaned over time from the Discord commentary and by asking such questions.
The levels for Friday and then we’ll look at the action and my thoughts as they played out:
First some context into the open and why I wouldn’t have simply longed the open:
The overnight session had held 33.5 again and did a bit of “fk around and find out” on both sides of the spike base (very common overnight) between the minor 55 level and the major 33.5 spot. Buyers were able to grind through the inventory in the 55-60 range and test the major 69-72 spot on data. The reaction there was pretty clear, and cash opened at 60.75. I’m never slamming the open long in this situation given the proximity to 69-72 and the proven reaction premarket. After a quick wick lower, the opening drive takes price straight through 69-72 on the 2nd test. I’m also never chasing this rip above 69-72 as the presence of the B period single prints sitting just above the spot can make things awkward. We can see the reaction there, but the dip was bought above 69-72. I probably could have found an entry here but had reasons for not doing so. Once that dip is bought and driven to a new high, the day has a lot of hallmarks of a trend day up. The failure in the strong 5797.5-5802 range and prior week low is no surprise. I’m still never blindly shorting that spot in this situation given the failure from sellers down at 33.5, the rejection of Thursday’s spike, the reclaim and bid of 69-72 and the existing trend structure. In 99 of 100 instances in 2024 that would have ended poorly. That said, the failed reclaim of prior week low is absolutely a warning sign.
From there I have a decision to make. We have a failed reclaim of prior week low (a pretty powerful short signal) vs a trend day up structure. Here was my assessment and action.
It held the spot (75.5-82), I entered at 81, took profit at 89 and 99 and we see what happened when buyers couldn’t make new high of day.
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Levels - Note not all weekly levels will be used each day but they could all present as part of an “active sequence” within a given day(s). Focus on the bold levels in general and certainly on high time frames
See weekly levels for higher
5845.5
5834-5837.5 Will consider this potentially strong if seen on Monday
5822.5
5807.25 Thursday 10/31 HOD (Monitor for LAAF)
5803.75 reference Friday’s inside day high (monitor for LAAF)
5797.5-5802
5785.75 reference Friday’s VAH (monitor for LAAF)
5772.5 (Can just extend the weekly 69-72 range for Monday)
5755.5 Friday’s mini spike base.
5752.5 reference Friday’s inside day low (monitor for LBAF)
5747
5734.5 reference Thursday 10/31 low
5733.5 (we had previously used 5730-35, monitor the whole range for a high time frame LBAF)
5724 9/29 week RTH low (monitor for LBAF)
5713 (as from September, I still tend to think anywhere in the 5702.75-5716 range could trigger a LBAF of 24 and 33.5 but there is a lot more potentially trapped long inventory now sitting above this spot)
5702.75 top of the 5682.25-5702.75 range we traded the week of 9/15 (monitor SPX 5674 in this range- 9/20 and 10/2 SPX lows and bottom of the SPX 5674-5762.5 box)
5682.25 (monitor for LBAF)
See weekly levels for lower
COMMENTARY:
In theory Monday is relative straightforward as Friday was an inside day. Alas, it is of course never easy. On a clean break of either side of an inside day’s range we expect to test the high or low of day from the preceding day. This isn’t particularly actionable to the upside as Thursday and Friday’s highs are so close together. To the downside, this is also problematic due to the proximity of 47 just below Friday’s low. Further, Thursday’s range is highly susceptible to a look below or look above and fail as described in the weekly plan. Because of this current setup, I actually prefer trading a failed break of Friday’s (or Thursday’s) range. Something like these:
Certainly, a clean break of Thursday’s range in either direction should not be faded. Long a break to the upside and short a break to the downside. I will likely only take one of these trades if there is a clean back test for entry.
If we open cash (also applies to overnight trading) within Friday’s range, there are a couple additional trades I’ll consider.
Shorts:
A fail or look above and fail (always better) of 69-72.5 likely resolves down to 60. Monitor for continuation to and through Friday’s spike (55.5), low (52.5), and Thursday’s spike (47).
A fail or look above and fail (better and in this case I would consider highly susceptible) of 5785.75 should find its way toward 69-72.5. On persistent weakness below 85.75 following a LAAF I think 55-60 becomes highly likely and potentially more.
Longs:
We’ve already covered the LBAF of Friday’s low. I would be cautious of a fail at 60 so I might be patient and wait for a nice base to form back above 52.5-55 before taking a long targeting 69-72.5. Above there and it could get a bit awkward but persistent strength back above 69-72.5 following a LBAF should find its way to 85.75.
I won’t plan ahead of time to chase any gap up with a long. If there is a strong and bullish profile developing, I’ll consider it, but an inside gap up is just begging to turn into one of the above short setups.
What is LBAF ?
Nice. That prior week low second rejection was my signal to go short, and optionsdepth 3D gamma profile guided my runners to the finish with a potential long at 5720 (SPX).