ES Daily Plan | August 29, 2023

Today’s session essentially cleaned up most of Thursday’s poor structure, although not entirely. The market remains in a state of balance, highlighting the importance of staying nimble.

ES Daily Plan | August 29, 2023

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Contextual Analysis

The overnight (ON) session turned out to be mostly uneventful, as trading occurred within a range of 10 handles. Throughout the majority of the ON session, attempts by aggressive buyers to break the crucial 4425 level were met by passive sellers, who managed to absorb their efforts. The break eventually materialized before the opening of the RTH session, triggering a squeeze that led to the formation of two sets of single prints.

The closing overnight strength resulting in the RTH session opening on a true gap to the upside, indicating that the session opened completely outside of the previous day's range, but more importantly, above Thursday’s lower distribution. The market immediately saw a push higher after open, coming just three handles shy of reaching the final upside target at 4450, were passive sellers were waiting. Once again, make sure to keep track of the final intraday upside and downside targets, as this simple approach can help you avoid getting into unnecessary difficulties, especially when the market is in short-term balance. Unsurprisingly, late buyers got caught just below 4450, forming a poor high during the three initial periods (A, B and C). This resulted in a reversal that ended filling the gap and eventually the two sets of single prints from the ON session. Having defended the 4425 level for the better part of the ON session, the sellers then struggled to gain traction below it during RTH. Despite today's relatively narrow range, the PM session delivered some wild swings in both directions, with the M-period cleaning up the developed poor high.

Wild swings in both directions during the PM session.

On the chart, we can observe how today’s session essentially cleaned up most of Thursday’s highlighted poor structure, although not entirely. The daily remains in a state of balance, highlighting the importance of staying nimble. The short-term value (5D VPOC) is below the last price, while the medium-term value (20D VPOC ) is located above it. I will use today’s spike base as a short-term reference point to asses strength or weakness. The primary objective for buyers is to end the weekly OTFD, by breaching 4468.75. Sellers aim to re-establish acceptance within Thursday’s lower distribution.

For tomorrow, the Smashlevel (Pivot) is 4448, representing today’s spike base. Break and hold above 4448 would target the upper end of the current 6D balance area at 4468.75, which is the high of the previous week’s inside week. Break and hold above 4468.75, would end the weekly one-time framing down, and target the final upside target of 4487, representing the medium-term value (20D VPOC). Holding below 4448, would target the weekly level of interest at 4425, as well as the final downside target of 4402, in the case of continued weakness.

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Going into tomorrow's session, I will observe 4448.

• Break and hold above 4448 would target 4468 / 4487

• Holding below 4448 would target 4425 / 4402

Additionally, pay attention to the following VIX levels: 15.82 and 14.34. These levels can provide confirmation of strength or weakness.

• Break and hold above 4487 with VIX below 14.34 would confirm strength.

• Break and hold below 4402 with VIX above 15.82 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.