State Switch - Bears Switched From "Noise" to "Flow" - Does The Overnight Balance Hold? Gameplan April 17

5340 Failed, and we fell free as anticipated

We started out April 16th in what I call, the “Noise State.”

I’ll explain what I mean using the picture below and offering some color.

Remember: Noise State: Most of the time, ES is stuck in what I call the Noise State. This is the default mode of the market—price chops, traps, fakes, and resets. It doesn’t trend cleanly. It oscillates. One moment we’re bouncing off a low, then we’re running two levels higher, then we stall, fade, rally again—and by the close, we’re right back where we started. Maybe. That’s the game in the Noise State. It’s a market in negotiation—no clear winner, just back-and-forth indecision. We don’t get to pick the size of the range. We don’t get clarity. We get movement that feels like momentum but rarely follows through. This is the norm.After the 80 point pop at 4:25AM we went no where.

In the early hours of April 16th, after the 80 point pop at 4:25AM EST, there was a 20 point range that ES oscillated in for nearly 4 hours. While this is an extreme example of “noise”, using a 5 minute chart, ES finds itself regularly here in this state. You can find this type of price action on 15 min, 45 min, 1 Hr, 3/4 Hr, and even daily charts. The range may change in size and shape and the beforehand impulse could be up or down. We may even grind into the state. But here’s what’s important:

It’s a period of consolidation.

During this period of consolidation, price coils as the battle of bears and bulls can be see real time — I think of it as a pressure cooker. We build up pressure in this state for the next move in ES. Often times it results in a violent move on way or the other.

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Note: This is part 1 of today’s letter. Part 2 will be coming out as we get closer to the open. Explained below.

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We never know when that move is coming.

That’s why it’s critical to avoid trading noise and follow the plan:

1. Have preplanned, Grade A+ setups according to the core strategy

2. Take profits when they are due

3. Reduce risk as quickly as possible by using profit taking system and size positioning rules

I wrote this yesterday in the April 16th Newsletter, “The Week Starts Out In The "Noise State." Does It Continue? April 16 Gameplan”:

Most of the time, the market lives in the Noise State.

If you can trade that, you can trade.

This is exactly why our profit-taking system works:
ES rarely moves in a straight line. It fakes out, whipsaws, flushes, rips, stalls—then reverses.

It takes the long way home.
And if you don’t know when to take profits, the market will decide for you.

There’s very little we control when it comes to being a trader. We don’t “know” anything. We can’t predict the future. We’re unsure of what levels will be respected, how many levels will be blown, and we don’t know if/when we’re going to enter the flow state. So we don’t try to be heros. We don’t chase homeruns

“We can’t predict the future”

True we can’t know what’s going to happen before it does.

But, we can learn tendencies.

ES tends to use noise states to build pressure for the next move. The move may last 5 minutes or 5 days. We may go just a single length of the range or 10X the length of the range in a fleet move. When ES breaks out of the noise, it seeks higher time frame levels of demand/supply and liquidity.

When ES in the “noise state”, we must to look for opportunities outside that range.

With price noise between 5378 and 5395 I noted the opportunity I was looking for outside that range.