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ES Daily Plan | April 5, 2023
Despite the lackluster performance of sellers during the closing session, failing to print an outside day down, they were able to bring the daily back to balance.
Observing the balance area on the 4-day composite.
During the Asian trading hours, the overnight session remained relatively calm, with trading occurring within Monday's upper distribution. As soon as the European session opened, the pace of market activity picked up, and buyers explored prices above prior day’s high, breaching the poor high. Despite a brief pullback before the start of regular trading hours (RTH), the market opened with a gap to the upside once again.
The small true gap to the upside was immediately filled and sellers were able to establish acceptance within prior day’s range, which is the most bearish outcome when dealing with gaps to the upside. The failure of buyers to sustain the upside gap attracted responsive sellers. The B-period low tested the Smashlevel of 4143, which was yesterday’s low volume node, resulting in a minor bounce of only 10 handles. During the C-period, both the level of 4143 and the VIX resistance level of 19.44 were breached simultaneously, adding to the downward pressure in the market. It was interesting to observe the correlation between ES and the VIX levels today. I will share a visual of this correlation on Substack for reference.
As the market experienced an unsuccessful upside gap, breached the Initial Balance (IB) and overnight (ON) lows, and formed single prints and overlapping value lower, the setup for a potential afternoon rally high becomes attractive. The low of the F-period bounced precisely from Friday's TPOC, to the tick, and the G-period eventually ended the intraday one time framing up, resulting in some short-covering. Carry forward today’s low as weak.
Although the F, G and H-period had pretty significant positive delta (visible to the right), the afternoon rally high setup during I-period was successful and provided a decent drop, despite the buying effort. However, sellers were unable to print a new daily low, which was disappointing given that the F-period low was weak. Was today’s b-shape profile (in an uptrend) only caused by long liquidation rather than stronger sellers? Observe today’s highlighted main distribution going forward for clues. A swift return of the price to the upper distribution for today's session may indicate a lack of stronger sellers. Conversely, if the price remains within the lower distribution, it could imply the possibility of further downside pressure.
Despite the underwhelming performance of sellers during the closing session, failing to print an outside day down, they were able to bring the daily back to balance after breaching Monday's low. My analysis suggests that the daily chart is currently indicating a 2-day balance, taking into account the 4-day composite that I have added to the chart. The visually evident balance area is my primary focus in the short-term.
Going into tomorrow's session, I will observe 4135.
Break and hold above 4135 would target 4143 / 4158 / 4175
Holding below 4135 would target 4112 / 4096 / 4083
Additionally, pay attention to the following VIX levels: 19.92 and 18.08. These levels can provide confirmation of strength or weakness.
Break and hold above 4175 with VIX below 18.08 would confirm strength.
Break and hold below 4083 with VIX above 19.92 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