ES Daily Plan | August 11, 2023
The expected volatility took place. However, the overall context of the market remains relatively unchanged.
I will use the 4487 level to assess the short-term strength or weakness. Daily back to balance.
Contextual Analysis
The overnight (ON) session immediately started to fill the poor structure created from yesterday’s closing session. Take a look at the TPO chart (Split) that I included in the previous daily plan, as it effectively illustrates the poor structure in question. Yesterday’s K, L and M-period downside was retraced prior to the CPI data release. Following the release of the CPI data, the market demonstrated its typical volatility, resulting in reaching the last upside target of 4525 to the tick. During this sequence, the VIX reached a low of 15.06 (support level at 15.08). I don't hold any positions during CPI data releases, so these were merely interesting observations.
Speaking of interesting observations, the RTH session kicked off with a rally right from the open, with the VIX instantly breaching its support level of 15.08. Subsequently, the last upside target of 4525 was reached and exceeded, with the A-period having a relatively extreme positive delta of 15K. The highlighted resistance area from 4525 to 4536, was the area that buyers needed to break and hold above, as discussed. Despite the heavy buying effort in the A-period, which in hindsight most likely was fueled by yesterday’s sellers exiting their positions, the buyers were unable to sustain their momentum above 4525 due to the absence of fresh buyers. Noteworthy is the fact that the VIX returned back above its support level of 15.08 at the same time as 4525 was taken out in the C-period. I will provide a recap of the correlation between the ES and VIX levels on Substack. From that point on, the sellers were in control of the auction, essentially selling every bounce to establish new weekly lows. However, they failed to form an outside day down, after closing within yesterday’s range.
Despite today’s volatile moves, the overall context of the market remains relatively unchanged. The buyers managed to end the daily OTFD, bringing it back to balance after breaking the prior day’s high. Conversely, the sellers effectively shifted the short-term value lower, from 4525 to 4487. I have included a 5D volume profile, highlighting the short-term value. Note how the profile is imbalanced to the downside, suggesting that the downside auction is incomplete. I will use the 4487 level to assess the short-term strength or weakness. Immediate price exploration lower or stop out sellers first?
For tomorrow, the Smashlevel (Pivot) is 4487, representing the short-term value (5D VPOC). Break and hold above 4487 would target today’s initial balance low at 4507, coinciding with the Weekly VWAP, as well as the last upside target of 4525, coinciding with the Monthly VWAP. Holding below 4487 would target the spike base of 7/11 at 4465, as well as the last downside target of 4451, representing the afternoon pullback low from 7/11. Take note of the MA50 at 4461.
Going into tomorrow's session, I will observe 4487.
Break and hold above 4487 would target 4507 / 4525
Holding below 4487 would target 4465 / 4451
Additionally, pay attention to the following VIX levels: 16.72 and 15.04. These levels can provide confirmation of strength or weakness.
Break and hold above 4525 with VIX below 15.04 would confirm strength.
Break and hold below 4451 with VIX above 16.72 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.
Apologies if this is covered elsewhere: I would like to understand the VIX better - adding it to Sierrachart I see various options. Please could you clarify which contract you are basing your analysis on? Very many thanks for your excellent work and for sharing it.
Thank you once again. Buddy great plan traded Longs and shorts. Perfect day!