ES Daily Plan | April 6, 2023
The daily is one time framing down after breaking the previous day's low, and today’s profile has unfinished business at both extremes.
The highlighted poor structure partially filled, can sellers achieve more fills?
Contextual Analysis
During the overnight (ON) session, the Smashlevel of 4135 was immediately tested and price was rejected, with an ON high of 4135.50, which turned out to be the high of today's full session. As discussed in previous plan, 4135 was the resistance level from yesterday's lower distribution, where sellers had to step into keep the downside pressure intact. The rejection off 4135 triggered a full traverse of the lower distribution, which was completed before the opening of the regular trading hours (RTH).
The RTH session opened at the lower end of previous day’s range, and buyers were able to hold above the opening level during A-period, but without gaining much traction to the upside. Passive sellers were waiting near the ON mid, absorbing the initial upward impulse move. The pace of market activity picked up in B-period, when sellers breached the 2-day balance low and cleaned up yesterday’s weak low. The main target in the event of a downside break was the poor structure highlighted on the composite profile, and sellers managed to fill it partially. A poor low was formed during the C and D-period, which led to some short-covering. However, in the E-period, sellers were reloading at the previous day’s low, resulting in a downside continuation. This was probably the cleanest short of the day with very visual absorption and good trade location. The downside continuation led to new daily lows, taking out the D-period low, and this is where some very interesting events took place. We could observe heavy selling effort following the break of the D-period low, but the sellers failed to gain downside traction. In other words, their effort was absorbed by passive buyers. During this sequence, another poor low formed and on top of that, the VIX resistance level of 19.92 was tested and rejected. As a consequence, the sellers got trapped at bad location, which aggressive buyers took advantage of during the PM-session. I posted a visual of this sequence on Twitter, which is definitely worth checking out.
The daily is one time framing down after breaking the previous day's low, and today’s profile has unfinished business at both extremes. As previously noted, the sellers managed to partially fill the poor structure from the composite profile, but by the end of the session, the market had returned back within the main distribution. The sellers are determined to continue the pattern of lower highs and lower lows, with the aim of targeting the remaining portion of the poor structure all the way down to the prior 3-week balance high. However, if this pattern is broken, it could potentially trigger a short-covering rally that targets a traverse of the main distribution.
Going into tomorrow's session, I will observe 4120.
Break and hold above 4120 would target 4135 / 4143 / 4158
Holding below 4120 would target 4102 / 4083 / 4070
Additionally, pay attention to the following VIX levels: 20.04 and 18.12. These levels can provide confirmation of strength or weakness.
Break and hold above 4158 with VIX below 18.12 would confirm strength.
Break and hold below 4070 with VIX above 20.04 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
Thank you Smash! VIX really helped not to short in the hole today.