ES Daily Plan | April 19, 2023
Once again, the morning weakness did not lead to a continuation to the downside, allowing the buyers to hold onto their short-term control.
The primary objective for sellers is to break the pattern of higher lows.
Contextual Analysis
The overnight (ON) session was very quiet during the Asian hours, trading within yesterday’s spike area. The market came down and tested the Smashlevel of 4173, which represented the base of the spike, and the buyers successfully defended it. The ON low was 4172. The European session was considerably more eventful than the Asian session, with the buyers making a decisive breach of yesterday's inside day. The first upside target was Friday’s unfinished business at the highs, which was achieved and exceeded before the opening of the regular trading hours (RTH).
Due to the strong ON session, the RTH session opened with a true gap to the upside, indicating that the session opened completely outside of the previous day's range. As always, if there is an early inability to break and sustain a move above the ON high, it can create opportunities to fade the market, targeting an inventory correction. Initially, the buyers struggled to regain the opening level, which led to early weakness and the gap getting filled in B-period already. The sellers were able to establish acceptance within previous day’s range, which is the most bearish outcome when the market opens on a true gap to the upside. Today's session was similar to the last two sessions, where weakness was observed in the morning from which the buyers were able to recover. The reversal from the lows during E-period was reminiscent of yesterday's price action, characterized by a period of consolidation, a sweep of the lows, and a subsequent sharp reversal. The rest of the session was dominated by a battle around the previous day's high, where sellers were passively reloading.
Despite the weakness seen today, the buyers are still in control in the short term, with the daily chart continuing to form higher highs and higher lows, and buyers building value above the 13-day value area. The primary objective for sellers is to break the pattern of higher lows, which has potential to trigger weakness. The past three days have exhibited similarities, but today's session was distinct due to the absence of a closing rally that was present in the prior two days. I am closely monitoring the levels of 4183 and 4163. 4183 represents today's resistance area from the PM session, which buyers aim to gain acceptance above to challenge today’s excess. On the other hand, the sellers aim to establish acceptance below 4163 within the value area, which could result in challenging several stacked daily lows.
Going into tomorrow's session, I will observe 4183.
Break and hold above 4183 would target 4194 / 4208 / 4220
Holding below 4183 would target 4163 / 4146 / 4130
Additionally, pay attention to the following VIX levels: 17.60 and 16.04. These levels can provide confirmation of strength or weakness.
Break and hold above 4220 with VIX below 16.04 would confirm strength.
Break and hold below 4130 with VIX above 17.60 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.
Hello what do you look for to spit exhaustion or absorption. Thanks for the input
The longest stalemate I can remember. It seems both parts (buyers and sellers) are waiting for the other to be exhausted before breaking up or down