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ES Daily Plan | August 2, 2023
Responsive activity remains the main theme, while the market awaits more market-generated information.
Today, we had yet another calm and quiet session. After yesterday's close above 4609, the buyers failed to see a continuation following a look above yesterday’s high and fail during the overnight session. This type of responsive activity is commonly observed in the absence of initiative activity when the market is in a state of short-term balance. The level of 4609 was breached, and the subsequent retest presented a solid short opportunity for traders participating in the overnight session. I will provide a visual of this sequence on my Substack to highlight this point further. The next level of interest at 4595 was tested, with the VIX testing its resistance level of 14.28, resulting in a bounce.
Similar to yesterday's session, the RTH session today remained quiet. The first hour of the RTH session, known as the initial balance, exhibited higher volatility, while the remainder of the session was characterized by choppy price action. 4609 was tested and rejected in the B-period (HOD: 4609.25). Yesterday’s session provided a look above the overnight high and fail, while today’s session saw a failure below the overnight low, prompting a reversal. In balanced market conditions, these setups are quite common, creating an unpleasant environment for breakout traders in both directions.
The buyers continue to struggle to establish acceptance within Thursday’s upper distribution, while the sellers are finding it difficult to gain significant downside traction. All levels remain unchanged. In general, the buyers aim for a break and hold above 4609, with their target set at the resistance area. Conversely, the sellers are looking for a break and hold below 4595 to target the support area. Reminder, when the market lacks a clear directional conviction, it’s crucial to not overstay your welcome in any trade.
“After breaking out from the 4-week balance area in mid-July, the market has been consistently establishing value at higher prices, demonstrated by the upward migration of both the short-term (5-day VPOC) and medium-term (20-day VPOC), now at 4605.” However, sellers managed to close below 4605. It remains to be seen how this will influence tomorrow's trading session.
For tomorrow, the Smashlevel (Pivot) is 4609, representing both the value area high from the previous week and also the high from two weeks ago. Break and hold above 4609 would target the resistance area from 4623 to 4633. Take note of the 7/27 ON high at 4634.50, which is untested in RTH. Holding below 4609 would target 4595, as well as the support area from 4584 to 4575, coinciding with the previous week’s VPOC.
Going into tomorrow's session, I will observe 4609.
Break and hold above 4609 would target 4623 / 4633
Holding below 4609 would target 4595 / 4584 / 4575
Additionally, pay attention to the following VIX levels: 14.58 and 13.28. These levels can provide confirmation of strength or weakness.
Break and hold above 4633 with VIX below 13.28 would confirm strength.
Break and hold below 4575 with VIX above 14.58 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.