ES Daily Plan | April 10, 2023
Currently, the market is accepting the higher prices following the directional move away from the prior 3-week balance.
Provided that trading occurs above the highlighted LVN, buyers remain in short-term control.
Contextual Analysis
As I mentioned in the Weekly Plan released yesterday, the previous week, which was of a shorter duration, was dedicated to processing the imbalanced move from the week prior. Currently, the market is accepting the higher prices following the directional move away from the prior 3-week balance. This situation is evidently more bullish than bearish, and provided that trading occurs above the highlighted low volume node (LVN), which represents the poor structure from the 2-day composite, buyers remain short-term control. The inability of the market to fill the poor structure on both Wednesday and Thursday is a bullish indication. The most bearish outcome would be if sellers can establish acceptance back within the prior 3-week balance, below 4083. Note that 4083 is the last yellow downside target for tomorrow’s session.
The daily has returned to a 4-day balance, which means that I will stay very nimble within the balance extremes. A larger directional move will take place once acceptance is established outside the balance area. When the market is in short-term balance, the general rule is to go with the break of the balance area. Break to the upside (Look above and go), you want to be a buyer. Break to the downside (Look below and go), you want to be a seller. Monitor for continuation (Acceptance) or lack thereof. Lack of continuation (Failed breakout / Look above/below and fail), you want to fade and target other side of balance. The current 4-day balance's low holds significant importance since if it's breached by sellers, the weekly one time framing up comes to an end, thereby further underscoring the significance of the LVN. Thursday’s session resulted in a double distribution, and I’m observing the support of the upper distribution in the short-term.
For new followers, the yellow levels highlighted at the bottom are the primary levels that I focus on intraday. My strategy for preventing impulsive decisions at unfavorable locations involves following a simple yet effective rule of exercising caution when initiating trades outside of the yellow levels. This implies that I am cautious chasing longs above the last yellow upside target and shorts below the last yellow downside target. It is crucial to understand that refraining from chasing a trade is not an automatic invitation to initiate a trade in the opposite direction. I use the VIX levels in correlation with ES to gauge its strength or weakness. For instance, if ES breaks 4175 tomorrow (the last target), and the VIX fails to confirm the strength by maintaining below 17.54, I become even more cautious about chasing longs. In such a scenario, there is potential for reversal setups. Should the VIX indeed confirm strength by maintaining below 17.54, it does not necessarily mean that I will chase long trades. However, it does indicate that fading the move would not be a favorable option. The same applies for the downside.
Going into tomorrow's session, I will observe 4125.
Holding above 4125 would target 4143 / 4158 / 4175
Break and hold below 4125 would target 4115 / 4098 / 4083
Additionally, pay attention to the following VIX levels: 19.26 and 17.54. These levels can provide confirmation of strength or weakness.
Break and hold above 4175 with VIX below 17.54 would confirm strength.
Break and hold below 4083 with VIX above 19.26 would confirm weakness.
Overall, it's important to exercise caution when trading outside of the highlighted yellow levels. A non-cooperative VIX may suggest possible reversals i.e trade setups.
Be sure to check out the Weekly Plan, which provides a broader perspective and highlights significant levels of interest to watch in the coming week.
Disclaimer: Futures and options trading involves a high level of risk, with the potential for substantial losses. The information provided in this newsletter is for informational purposes only and is not intended to be a trade recommendation. It is the responsibility of the reader to make their own investment decisions and they should seek the advice of a qualified securities professional before making any investments. The owners/authors of this newsletter are not certified as registered financial professionals or investment advisers.
Just a quick shout out to you: Awesome Work!
Every time I read your newsletters I'm like: "This work is fantastic"!
(...honestly we should pay for this)
Thank you Smash!!