January 22nd, 2024

ES 5000. You always hear me talking about the three market environments: Range Expansion, Mean Reversion, and Consolidation. As of Friday’s close, we are now in Range Expansion higher, and the bulls are in control of the market. The Daily Bollinger Bands in ES are now pointing outward (which indicates range expansion), and the old peak of the daily Bollinger Band is what I consider ‘unfinished business’ from the last move higher. It looks like we could be headed there… that price is 4974, which essentially puts ES 5k as a possibility in the coming week(s). When I get this indication on a daily basis, I am now only looking long until I see a daily close below the 5-day sma or below the YTD AVWAP.

When we look at NQ, we see Range Expansion as well. 17,777 is what I see testing in the coming sessions. Once again, I only look long right now in NQ unless we get a daily close below the 5-day sma or the YTD AVWAP.

Now let’s talk about where the market isn’t bullish, and that’s the RTY and 10 YR (ZN). They are trying to make a move this morning on their charts, looking to regain the YTD AVWAP and 5-day sma’s, but it doesn’t feel like they want to be here. It feels more like they are getting pushed up here. At the end of the day, we are where we are, so it doesn’t matter how we get here (kind of), but if they can both start to push higher and ultimately hold above the 5-day SMA and YTD AVWAP, that just adds confidence to the buyers in ES and NQ, and we push quicker to their targets. Even if RTY and ZN just do nothing, I think that helps the bulls’ cause in ES and NQ because I think those markets have their eye on higher. Unless there is some sort of news event, I think they keep running.

As day traders, you have to realize the market environment we’re in (range expansion). Shorts intraday look good because they hit resistance, but the big players, in my humble opinion, right now have the momentum to the upside, and I would not be taking any shorts. Don’t step in front of a steam train to pick up a few pennies.

I will be focused on using my short-term strategy only on the long side and will be looking for a spot today to start a swing long position with a target of 4974. I will be live on Discord tonight at 4 ET, discussing this market environment and taking your questions in the chat. See you then!

Cheers, DELI