ES Daily Plan | August 25, 2023
Outside day down today as yesterday's buying effort was completely negated. The session ended with a downward spike. However, the main event is Powell's speech tomorrow at 10am EST at Jackson Hole.
Contextual Analysis
Yesterday, a significant move had already transpired after-hours due to NVDA, and for this reason I emphasized the importance of focusing on the 4487-4495 area. As known, 4487 represents the medium-term value (20D VPOC), while 4495 is the Weekly Extreme High, which always is a tricky location to initiate new longs due to its unfavorable location (weekly resistance). During the overnight session, trading took place above yesterday's range, with sellers emerging a mere 6 ticks away from 4487 (ONH: 4485.50). This ended up being the high of today’s full session.
The RTH session opened with a true gap to the upside, and the conditions were rather straightforward: Could sellers establish acceptance within yesterday’s range? This was a concern I highlighted in the previous plan, given the substantial positive delta of 37K. The A-period filled the gap (testing the Smashlevel of 4455), leading to a subsequent bounce. This bounce failed to reclaim the FS VWAP, providing early warning signs for the late overnight buyers. It’s worth noting that the initial balance cleaned up the poor high from 8/16. The buyers were unable to hold the second test of 4455, triggering stops (B-period single prints). As always, acceptance back within the previous day’s range is the most bearish outcome following a true gap up. The significant buying effort witnessed yesterday was approaching potential difficulties. That being said, the presence of single prints in the B, C, and D-periods weren't a surprising development. The sellers were in full control of the auction, resulting in clearing all downside target towards 4402, before the closing flush. I will publish a separate recap of today’s correlation between ES and VIX on Substack, as the VIX resistance level of 16.80 provided decent bounces in ES.
Today’s session resulted in an outside day down, with a significant negative delta of 38K. As a result the daily has returned to balance. The session ended with a downward spike. The general guideline is as follows: trading within and below the spike (Acceptance) presents a more favorable outcome for sellers, while trading above the spike (Rejection) is a more favorable outcome for buyers. However, the main event is Powell's speech tomorrow at 10am EST at Jackson Hole. This underscores the importance of remaining highly adaptable, given the anticipation of substantial volatility.
For tomorrow, the Smashlevel (Pivot) is 4402, representing the spike base, and the 5% correction level. Break and hold above 4402 would target the resistance area from 4415 to the final upside target of 4425. There is plenty of poor structure above, in the case of continued strength. Holding below 4402, would target the 4DB low at 4375. Break and hold below 4375 would target the lower end of the previous week’s range at 4354, as well as the final downside target of 4340.
Going into tomorrow's session, I will observe 4402.
Break and hold above 4402 would target 4415 / 4425
Holding below 4402 would target 4375 / 4354 / 4340
Additionally, pay attention to the following VIX levels: 18.06 and 16.34. These levels can provide confirmation of strength or weakness.
Break and hold above 4425 with VIX below 16.34 would confirm strength.
Break and hold below 4340 with VIX above 18.06 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.
I had a really good day, so I will probably skip tomorrow's shenanigans! Thank you for the awesome work week after week!
Great plays as always! I shorted since the open. Thank you for your analysis!