Discover more from Smashelito's ES/SPX Newsletter
ES Daily Plan | August 30, 2023
Multi-distribution trend day after breaking out from both the multi-day balance area and inside week. Immediate resistance 4507-4515, support at the lower end of today's upper distribution at 4489.
The upside was effectively capped by the Smashlevel at 4448 in the overnight (ON) session. Trading primarily stayed within the range of the previous day, aside from a brief period in the European session when buyers briefly pushed prices above the high of the previous day.
The RTH session opened within the previous day’s range, the market started to rally right out of the gate. Both the level of 4448 and the ON high of 4454.25 were quickly taken out. The subsequent pullback to 4449 found buying activity, presenting the first opportunity for a long, targeting the 6D balance area at 4468. This upside target was reached already in the B-period. If you didn’t have a position during the initial balance, the next opportunity for a long setup presented itself when the market pulled back and retested the multi-day balance area in the C-period. These two long setups were probably the best opportunities in today’s session. The final upside target of 4487, previously discussed as an "upside magnet", was achieved as early as the E-period. The VIX managed to remain above its support level of 14.34 throughout the session, reducing my interest in chasing long positions above 4487. However, what stood out today was that the market broke out of both balance and an inside week, providing increased potential for maintaining runners. Observe how the market essentially started to consolidate after reaching 4487, creating a much more challenging situation for late buyers compared to the initial five periods. This upper distribution will be of importance in the short-term.
Today’s session obviously contains poor structure due to the breakout, and failure to see any fills would serve as a bullish indication. Buyers achieved a lot during today’s session. They managed to end the weekly one-time framing down, shift the daily to one-time framing up, close the session above the MA50 and the medium-term value (20D VPOC) of 4487, and the short-term value (5D VPOC) has shifted from 4415 to 4446. Overall, the buyers are not facing significant trouble as long as the breakout is maintained. Trouble would start to kick with trading below 4469, which would put today’s breakout into question. Take note of both the monthly and weekly VWAP within the support area.
Readers who are following my Weekly Plan are aware that we are currently trading within the weekly resistance area ranging from 4485 to 4515. As discussed, this resistance area is highly significant because it is the area from which the recent weakness originated. The buyers aim to break and hold above the Weekly Extreme High of 4515, with a weekly close above it being preferred. Additionally, a VIX below 13.63 would confirm a break above 4515. Personally, I’m not a fan of reaching the Weekly Extremes this early in the week, so some caution until value starts to establish above the immediate resistance area from 4507 to 4515.
As always, navigating the shift from balance to imbalance in trading is always challenging as it demands a readjustment of your strategy. After 6 days of participants agreeing on value, with responsive activity prevailing, the market has now potentially transitioned to a phase of initiative activity (imbalance). Adjust accordingly.
For tomorrow, the Smashlevel (Pivot) is 4507, representing today’s spike base. Break and hold above 4507 would target the Weekly Extreme High at 4515. Break and hold above 4515 would target a clean up of today’s imbalanced profile to the upside towards the final upside target of 4539. Holding below 4507, would target the lower end of today’s upper distribution at 4489, coinciding with both the MA50 and the medium-term value (20D VPOC). Break and hold below 4489 would target fills of today’s breakout structure towards the final downside target of 4469, coinciding with the Monthly VWAP.
Going into tomorrow's session, I will observe 4507.
Break and hold above 4507 would target 4515 / 4539
Holding below 4507 would target 4489 / 4469
Additionally, pay attention to the following VIX levels: 15.14 and 13.78. These levels can provide confirmation of strength or weakness.
Break and hold above 4539 with VIX below 13.78 would confirm strength.
Break and hold below 4469 with VIX above 15.14 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.