ICT Emini S&P 500 Review / January 03, 2023

Summary

In this video, the speaker discusses market analysis, focusing on the PMI numbers and their impact on trading. They highlight the importance of understanding support and resistance levels, fair value gaps, and market structure to make informed trading decisions. The speaker also emphasizes the need for active chart marking and the role of patience in trading.

Takeaways

• 📈 The speaker was anticipating the PMI numbers release at 9:45 AM and expected a potential market reaction leading to a sell-off.
• 📊 The video discusses the importance of watching for price movements within a specific range and the significance of old highs and volume in balance.
• 🔍 The speaker emphasizes the use of different time frames, from daily to 1-minute charts, to identify trading opportunities and market trends.
• 📉 The concept of 'fair value gap' is highlighted as a key technical analysis tool for identifying potential support and resistance levels.
• 📝 The speaker mentions the importance of marking up one's own charts as a learning tool rather than relying on others' charts.
• 🚫 The video script mentions avoiding 'lazy' approaches to trading and emphasizes the need for personal involvement and effort.
• 💡 The idea of 'consequent encroachment' is introduced as a concept related to the middle of a gap or imbalance, indicating potential market inefficiencies.
• 📌 The speaker identifies specific price levels and gaps, such as the 30-minute fair value gap, as critical areas for trading decisions.
• 📉 The script details a trading strategy involving short positions on fair value gaps and the anticipation of continued downward price movement.
• 📈 The speaker discusses the anticipation of an aggressive rally ('Judas swing') during the PMI numbers release, which did not materialize as expected.
• 📊 The importance of observing market structure shifts and price behavior around specific levels, such as 38.72 and 38.60, for entry and exit points in trades is highlighted.

Q & A

What is the main event the speaker was anticipating in the morning?

The speaker was anticipating the release of the PMI numbers at 9:45 AM.

What was the speaker's initial expectation regarding the market's reaction to the PMI numbers?

The speaker expected the market to 'whip up' and then look for a sell-off after the PMI numbers were released.

What trading strategy did the speaker mention for the day?

The speaker mentioned trading inside a range with a bit more patience, as they were waiting for the market to break out of the range.

Why did the speaker refer to the 'old high' in the context of the daily chart?

The 'old high' referred to the highest point in the trading range from the day's opening, which was used as a reference for potential resistance.

What is the significance of the '60 Minute chart' mentioned by the speaker?

The '60 Minute chart' was used to observe the market's failure to reach the employment balance on the daily chart and to identify buy-sell liquidity.

Why did the speaker choose to use a '30 Minute chart'?

The speaker used the '30 Minute chart' to clearly see the imbalance in the market and to identify potential trading opportunities.

What is a 'fair value Gap' and why is it important in the speaker's analysis?

A 'fair value Gap' is a price area that the market is expected to return to for a repricing; it's important as it provides potential entry and exit points for trades.

What does the speaker mean by 'institutional overflow entry drill'?

The 'institutional overflow entry drill' refers to a trading setup where the market breaks a significant low, indicating a potential institutional entry point.

Why did the speaker emphasize the importance of marking up one's own charts?

The speaker emphasized marking up charts to enhance understanding and learning, as relying solely on others' charts is considered a lazy approach that won't lead to successful trading.

What was the speaker's trading action on the first trading day of the year?

The speaker went short on two fair value gaps and was looking for continuation down into the levels shared on Twitter.

What was the speaker's strategy regarding the trades if the price went above a certain level?

If the price went above the 39.20 level, the speaker would likely have to close the trades, as it would indicate a change in market structure.

Outlines

00:00

📈 Market Analysis and Trading Strategy

In this paragraph, the speaker discusses their anticipation of the PMI numbers and their effect on the market. They were expecting a potential sell-off after the numbers were released. The speaker also explains their strategy of watching for market movements within a specific range and trading within that range, highlighting the importance of patience. They delve into technical analysis, discussing the use of different time frames such as the 60-minute, 30-minute, and 15-minute charts to identify imbalances and potential trading opportunities. The speaker emphasizes the significance of understanding market structure and using indicators like fair value gaps and institutional entries to make informed trading decisions. They also provide insights on how market movements can be analyzed on a minute-by-minute basis, focusing on the importance of recognizing and acting on market imbalances and the potential for institutional entries.

05:01

📉 Trading Insights and Market Behavior

The speaker continues their analysis by discussing the retracement of the market back to the 15-minute fair value gap and the precision of the market's movements. They highlight the importance of recognizing algorithmic support and resistance levels, which may not always align with traditional support and resistance. The speaker also emphasizes the need for traders to actively mark up their charts to understand and predict market movements, rather than relying solely on pre-made charts. They discuss the concept of 'consequent encroachment,' which refers to the middle of a gap or imbalance, and its significance in trading. The speaker then shares their personal trading experience, detailing their entries and exits based on fair value gaps and market structure. They also mention their strategy of remaining an intraday scalper until a higher time frame narrative is established, indicating a more significant and sustainable price movement. The paragraph concludes with the speaker's approach to managing their trades, focusing on maintaining a heavy position and looking for opportunities to exit based on market movements and specific price levels.

Keywords

💡PMI number

The PMI number refers to the Purchasing Managers' Index, which is an economic indicator that reflects economic conditions in the manufacturing sector. In the video, the speaker is waiting for the PMI number to be released at 9:45 AM, expecting it to influence the market direction. The anticipation of this economic data is crucial as it can trigger market movements, affecting trading strategies.

💡Sell-off

A sell-off in financial markets is a rapid and significant decline in the prices of securities, often due to widespread selling. The speaker mentions expecting a sell-off, indicating a belief that the market will experience a downturn. This expectation is part of the trading strategy discussed in the video, where the speaker is looking for opportunities to sell based on market conditions.

💡Volume in balance

Volume in balance is a trading concept that refers to the equilibrium between buying and selling pressure in the market. The speaker mentions this term while discussing the market's behavior, suggesting that the market is stuck in a range and waiting for a breakout. This concept is important for understanding market dynamics and identifying potential trading opportunities.

💡Fair value Gap

A fair value gap in trading refers to a price level that is considered to be the 'fair' or 'true' value of an asset, often based on fundamental analysis. In the video, the speaker identifies fair value gaps as areas where the market is likely to return or reprice, indicating potential support or resistance levels. This concept is used to identify entry and exit points in trades.

💡Imbalance

Imbalance in trading refers to a situation where there is a significant difference between the supply and demand for an asset, leading to price volatility. The speaker discusses an imbalance in the market, indicating that the market is not in equilibrium and is likely to move in a particular direction. This is a key concept in identifying trading opportunities based on market inefficiencies.

💡Institutional overflow entry drill

An institutional overflow entry drill is a trading strategy used when a market breaks a significant support or resistance level, indicating a potential large-scale market move. The speaker mentions this concept when discussing a market break, suggesting that it is a signal for a potential trade. This strategy is used to capitalize on significant market movements.

💡Mean threshold

The mean threshold in trading is a concept that refers to the midpoint of a price range or block, often used as a reference point for decision-making. The speaker uses this term to describe the middle of an order block, indicating that it is a significant level in the market. This concept helps traders understand where the market might find support or resistance.

💡Consequent encroachment

Consequent encroachment in trading is a term used to describe a situation where the market moves into the middle of a gap or inefficiency, suggesting a potential change in market structure. The speaker mentions this concept when discussing the market's movement, indicating that it is a signal for a potential trade. This is a key concept in understanding market dynamics and identifying trading opportunities.

💡Breakaway

A breakaway in trading refers to a significant price movement that breaks out of a previously established range or pattern. The speaker discusses a breakaway in the context of the market needing to break out of a daily range before they are interested in a sustained price movement. This concept is important for traders who are looking for confirmation of a new trend or market direction.

💡Intraday scalper

An intraday scalper is a trader who seeks to profit from small price movements within a single trading day. The speaker mentions being an intraday scalper, indicating that they are focusing on short-term trading opportunities. This trading style is characterized by quick entry and exit of trades, often based on short-term market movements.

💡Daily volume balance

The daily volume balance is a term used to describe the equilibrium between buying and selling activity over the course of a trading day. The speaker discusses the expectation of a daily volume balance, suggesting that they are looking for a point where the market's buying and selling pressure is balanced. This concept is used to identify potential turning points in the market.

Highlights

The video discusses the anticipation of PMI numbers and its potential market impact.

The speaker shares a potential trading scenario based on the PMI numbers release.

Explains the importance of watching the old high in the trading range for potential sell-off signals.

Details the concept of volume in balance and its role in determining market direction.

The speaker uses the 60-minute chart to illustrate the market's failure to reach employment balance.

Describes the significance of the 30-minute chart in identifying market imbalances.

Mentions the use of the 15-minute chart to identify fair value gaps and market repricing.

Analyzes the market's behavior on the 5-minute chart, focusing on the start of a new trading year.

Discusses the market's trading above the buy side at 3900 and subsequent breakdown.

Identifies a low on the 1-minute chart as a potential institutional overflow entry point.

Explains the concept of mean threshold and its importance in market analysis.

Describes the market's behavior around the fair value gap and its implications for trading.

The speaker goes short on two fair value gaps, detailing the entry points and expectations.

Analyzes the market's consolidation around the 30-minute fair value gap and the potential for a breakout.

Emphasizes the need for traders to mark up their charts for better understanding and learning.

The speaker shares personal trading decisions and the reasoning behind them, including partial exits.

Concludes with the importance of observing the daily range for a higher time frame narrative in trading.

Transcripts

hi folks just a quick little video

this is the area I was watching on

this morning

and we're waiting for PMI number to come

out

at 9 45 and I was expecting it to likely

whip up into that and then look for a

sell-off and I tweeted about that this

morning as a potential scenario we were

waiting for 9 45 News not just simply

waiting for 9 30 opening

thank you

this old high here why this one is the

highest one in the range from today's

opening looking back here you go this is

the first one you go to that would be

higher than this one

and before we get this volume in balance

so we're stuck essentially inside this

range

waiting for it to come out of that so we

can obviously trade inside this range as

you watch me the other day but it takes

a little bit more patience

so we can drop down into the

60 Minute chart all right here is the

one hour chart you can see how we did

not get up

into that employment balance on daily

chart

we swap the buy sell liquidity

twice once twice

broke down

if everybody got

salsa liquidity and the 30 minute

whatever you got so notice we have this

big run here

but if we drop down into a

30 minute chart now I use the 30 minute

chart because you can clearly see that

imbalance right there

so

failure to get up above this High here

and run for that that's what we were

waiting for confirmation one way or the

other if it was going to run there not

in a hurry to take a trade

first trading day of the year

everybody's going to be wanting to get

in there and do something right away

we have a fair value Gap there

and you can see all those tweets were

mentioned before the fact

and then I mentioned that we would draw

down likely into this area here so let's

go into a 15 minute

okay and very clear 15 minute time frame

fair value Gap

beautiful return into it repricing and

then lower

down to a nice start of 30 14 and a half

five minute chart

[Music]

Market trades above again where the buy

side is nice round number 3 900. there

breaks lower

this low here we're going to look at

that on a one minute chart all right on

the one minute chart you can see

we had a run up into where buysite is

Market breaks down takes out swing low

now why do I like this low it may be

something like this one not so much well

you could have used this one here

where we went below it right on that

candle then we trade it right up inside

this imbalance there

that's more or less a institutional

overflow entry drill it breaks lower

really changes the market structure here

and over here so this is going to be a

little bit more

of a quality type setup

to have a fair value Gap in here

as it traded up into that that's an

expectation of lower prices because this

is also a breaker

bearish ICT breaker okay so inside this

lathdown close candle

it's returning back up into notice the

bodies of the candle they're respecting

half of that range from the candles high

and low

that right there is mean threshold mean

threshold is half of an order block

ing breaks lower creates another

imbalance repair of a gap from this

candle is high

that candle is low

and that shaded area in here

so I'm going to take these off as I talk

about them because it's no longer

important

and we have the up close candles here

once we break through it it's a bearish

order block

and institutional Oracle entry drill and

a fair value Gap so there's lots of

confirmation for wanting to be a short

seller here

on this candle as we trade up into it

and trade lower

leaving that open

okay leaving this range here open

is what Breakaway got

okay the market trades lower into our

survey gap on the 15-minute time frame

it consolidates I go short one more time

and accelerates down into

the 30 minute fair value Gap

here and as we went down below it limit

order was filled

and then we retrace all the way back up

to a perfect return to the 15 minute

fair value Gap look at the Precision

there now go back and look over here do

you see any kind of classic support

resistance that would justify that

perfect Precision right there no but the

algorithm does and sees the fair value

Gap that I've outlined on the 15-minute

time frame that's real support and

resistance folks the market trades lower

down into the low end of our 30 minute

fair value Gap

beautiful delivery and I

more or less told you all to screenshot

it on your own chart not just simply

take my charts because it's that's a

lazy person's approach to doing it you

won't learn that way you want to get in

here and get comfortable marking your

charts up it takes a little bit of

effort takes time

and

it's important for you to be able to do

it and if you don't do it if you don't

like doing it I promise you trading

won't be a successful Endeavor for you

you have to be involved you have to do

it yourself and it requires a lot of

effort on part of the students

Market hangs around

Works inside one more time consequent

encouragement which is the middle of an

imbalance mean threshold is the middle

of a order block

consequent encroachment is the middle of

a gap okay or an inefficiency like a

fair value Gap by sound of balance

outside efficiency or South side

imbalance by sound efficiency either or

just write that down because we'll build

on that as we go forward in the

mentorship but it goes halfway up into

that and then clears the buy side cell

size below here attack it runs down to a

really beautiful Turning Point 30 14 and

a half

and then now we've returned back up into

that 30 minute fair value Gap and now

consolidating in

around

and working the top end of that 30

minute figure that you got

so we'll be looking to see

[Music]

an eventual breakout of not that I'm a

breakout Trader but we want to see a

break out of that daily range before my

interest has really peaked on any

sustainable price run for analysis

purposes otherwise in layman's terms in

Easy language

we have to be an intraday scalper

until there's a higher time frame daily

narrative at work so that way everything

we look for is on a small time frame and

not expecting big monster moves

all right so we're watching price this

morning uh first trading day of the year

I went short on

two fair value gaps and

one at the top of the orange Fairway Gap

at 38.60

looking for continuation down into the

levels I shared on Twitter initially I

thought that we would get 39.20 as a

run-up aggressive run as a Judas swing

like a fake rally aggressive

during the PMI numbers at 9 45 uh Marco

was not having that so that's why I said

we have to wait and see what the market

does it failed to run above the 39.05

level

so I waited for the shift in Market

structure at just

below

38.72 and 3 4 73 and then return back

into a fair value guide you can see the

entries on the left-hand side on that

one minute chart

broke down traded again on a short entry

into the fair that I got and also very

shorter block and the third entry is at

the top of the orange purvey Gap at

38.60 as it traded up into that looking

for heaviness going down into

the 38 39 and a quarter level so I took

one partial

leaving two contracts on and I want to

get below that 38 42 50 level that's

where sell side is you can see that

noted on the right hand side on a 30

minute chart

and then why am I using a 30 minute

chart I want to see price remain below

that pair of a gap here on the left hand

side

if it goes above that then I'll probably

have to want to close the trades when

I'm thinking but I want to see it remain

heavy

heavy means I want to see it Go lower

and have difficulty rallying higher

and if we trade down below 38 42.50 I

will take one off but rejecting that 38

I'm sorry 3920 level like I was

expecting that daily volume balance up

there right hand side chart the upper

orange level

uh that to me was a likelihood of a draw

on the news driver okay but

I'll take another partial off here

and we'll see if it wants to go down and

take that I I mean a low hanging fruit

objective now

and we'll see if we get that

boom