ES Daily Plan | April 3, 2023
Friday’s session resulted in a triple distribution day with three sets of single prints and an upward spike.
My short-term level of interest will be 4122, which is the breakout single prints in L-period.
Contextual Analysis
Friday’s overnight (ON) session immediately explored prices above Thursday’s high during the Asian session. The prior 3-week balance high of 4083 served as the Smashlevel for Friday's session, and although sellers were able to break it during the European session, their success was short-lived as buyers quickly regained control, leading to new overnight highs.
The RTH session opened with a relatively small true gap to the upside. Despite its small size, sellers were unable to fill the gap, which was a nuance that indicated strength from the buyers. Thursday's session left the market in an imbalanced phase, characterized by daily and weekly one time framing up. Another gap up that failed to get filled indicated that the imbalanced phase was likely still ongoing, indicating that trading in the direction of the trend generally provides easier trade setups than trying to fade. The market was one time framing up intraday for six periods, forming two sets of single prints in the process. Patient traders should watch for the "Afternoon pullback low" setup that I emphasized in Friday's recap, as it presents an opportunity to join an upside continuation. We had a gap that was left unfilled, ON and IB high breached, higher value and single prints, which are good conditions for that setup. The "Afternoon pullback low" setup can be particularly effective because inexperienced traders may interpret the temporary weakness as real selling, when in fact it is just an inventory correction that shakes out weak long positions (and provides a better trade location for patient traders). During the H and I periods, there was fairly aggressive selling that passive buyers absorbed, which eventually led to a reversal and continuation. The Weekly Extreme High of 4130 from the previous Weekly Plan was reached, making it an ideal location to book profits for long positions and reassess.
Friday’s session resulted in a triple distribution day with three sets of single prints and an upward spike after M-period made a new daily high. My short-term level of interest will however be 4122, which is the breakout single prints in L-period that could potentially get some fills. The daily and weekly is one time framing up, while the monthly remains in balance. Note that the short-term value (5-day VPOC) is currently ~100 handles below Friday’s close at 4141, which means that buyers main objective is to spend time and volume at these higher prices to migrate the value higher. Sellers main objective is to end the daily one time framing up by breaching Friday’s low. Overall, sellers would prefer to see an immediate upside continuation that fails, rather than immediate weakness that may attract dip buyers. As I mentioned on Friday, we've now reached an area of prior balance.
Going into tomorrow's session, I will observe 4122.
Break and hold above 4122 would target 4136 / 4160 / 4175
Holding below 4122 would target 4112 / 4096
Additionally, pay attention to the following VIX levels: 19.60 and 17.80. These levels can provide confirmation of strength or weakness.
Break and hold above 4175 with VIX below 17.80 would confirm strength.
Break and hold below 4096 with VIX above 19.60 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. Twitter: @smashelito | FAQ: smashelito.com
Great analysis as always, Smash!
I'm curious about the VP you have on the right side of your TPO chart - how far is that looking back?
Thank you Smash for the imbalance diagram.