ES Daily Plan | August 18, 2023

The daily OTFD remains intact, with value continuing to develop cleanly lower in relation to the previous day.

Always keep in mind that predicting market bottoms is unnecessary; leave that task to other traders to handle.

ES Daily Plan | August 18, 2023

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Contextual Analysis

As a result of the market closing below the Weekly Extreme Low of 4390 today, I will be taking a day off tomorrow after a solid week, allowing other traders to take the lead in the price discovery process. As regular readers of this newsletter are aware, I’m always cautious about chasing below the weekly extremes to avoid initiating trades in an emotional state (FOMO). As always, refraining from chasing a trade is not an automatic invitation to initiate a trade in the opposite direction. Not trading is also a position.

The daily one-time framing down remains intact, with value continuing to develop cleanly lower in relation to the previous day. The primary objective for buyers is to start establishing at least overlapping value, and obviously the main goal is to end the daily one-time framing down by breaching a previous day’s high. Always keep in mind that predicting market bottoms is unnecessary; leave that task to other traders to handle. The short-term value (5D VPOC) has shifted lower from 4486 to 4465, and the primary objective for sellers is to continue shifting it lower to establish acceptance of these lower prices. In the case of another downside shift in short-term value, the high volume node (HVN) at 4425 is likely to be a strong contender.

It's important to highlight that a VIX above 17.14, validates a break below 4390. In other words, a reclaim of 4390, with a VIX below 17.14 has potential for some fills of today’s highlighted poor structure. This is just an observation to keep in mind. In such a scenario, the resistance area from 4415 to 4425 is a potential reload area for sellers. Conversely, holding below 4390, with a VIX above 17.14 has potential for further downside pressure.

For tomorrow, the Smashlevel (Pivot) is 4390, representing the Weekly Extreme Low from the Weekly Plan. Break and hold above 4390 would target fills of today’s structure towards the 5% correction level at 4402, as well as the resistance area from 4415 to 4425. Take note of the low of July at 4419.50. The most bullish response would be a break and hold above 4425, which potentially triggers a short-covering rally. Holding below 4390, indicating continued weak market conditions, would target the spike base from 6/26 at 4373, as well as the prior 4-week balance low at 4355. In the event of further weakness, the final downside target is 4340.

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Going into tomorrow's session, I will observe 4390.

• Break and hold above 4390 would target 4402 / 4415 / 4425

• Holding below 4390 would target 4373 / 4355 / 4340

Additionally, pay attention to the following VIX levels: 18.92 and 16.86. These levels can provide confirmation of strength or weakness.

• Break and hold above 4425 with VIX below 16.86 would confirm strength.

• Break and hold below 4340 with VIX above 18.92 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.

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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.

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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.