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ES Daily Plan | August 28, 2023
Last week formed an inside week, suggesting that the market is in short-term balance, as it looks for further MGI before making its next move.
I will continue using the 4402 level to gauge the strength/weakness in the short-term.
Friday’s RTH session opened right at the Smashlevel of 4402, and trading took place within a narrow range throughout the A-period. However, during the B-period, there was a noticeable increase in volatility. As a result, the market successfully reached the final upside target of 4425, where selling activity was observed. At the same time, the VIX tested its support level of 16.34, which was noteworthy. This series of events resulted in a reversal worth 60 handles, driven by heavy aggressive selling entering the market. This sequence effectively highlights why I always approach initiating new long positions around the final upside target with caution. I'm pretty sure that many inexperienced traders found themselves emotionally chasing that push higher, only to face immediate consequences. Anyway, the rest of the session ended up being rotational as buyers bought the dip.
I will maintain my interpretation of the daily as balance, even though it breached the low of the previous 4D balance. This assessment is based on the previous week being an inside week, indicating that the market is in a short-term balance, awaiting further market-generated information. As always, be sure to check out the Weekly Plan, published yesterday, which provides a broader perspective and highlights significant levels of interest to watch in the coming week. I will continue to use the 4402 level as a short-term reference point to asses strength/weakness. Buyers encountered difficulties gaining traction above this level during the PM-session on Friday, until the J-period decisively breached it. The weekly one-time framing down remains intact, as inside weeks technically do not bring it to an end.
For tomorrow, the Smashlevel (Pivot) is 4402, representing Thursday’s spike base, and the 5% correction level. Holding above 4402 would target the upper end of Thursday’s lower distribution at 4425. Break and hold above 4425 would target fills of Thursday’s highlighted poor structure towards the final upside target of 4450. Break and hold below 4402, would target the support area from 4385 to the final downside target of 4375.
Going into tomorrow's session, I will observe 4402.
Holding above 4402 would target 4425 / 4450
Break and hold below 4402 would target 4385 / 4375
Additionally, pay attention to the following VIX levels: 16.46 and 14.90. These levels can provide confirmation of strength or weakness.
Break and hold above 4450 with VIX below 14.90 would confirm strength.
Break and hold below 4375 with VIX above 16.46 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.