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ES Daily Plan | August 7, 2023
Friday's session resulted in an outside day down, following the emotional PM session. The prior multi-week balance high of 4498 is my short-term level of interest.
Failure to hold below targets fills of Friday's structure.
Friday’s RTH session proved to be quite eventful and presented significant challenges. Buyers initiated a strong push higher in the A-period, breaching both Thursday’s high and Friday’s ON high, putting an end to the daily one-time framing down. However, despite their solid efforts, this move turned out to be a look above the ON high and fail, as observed on the Footprint chart that I have included on the chart. As a consequence, a significant liquidation break followed. As always, absorption by itself is not enough for a reversal, aggressive sellers need to enter to confirm the trap. Review Friday's session and focus on the actions of the aggressive sellers who entered the market during the last 10 minutes of the A-period, right after the absorption took place.
The buyers were able to pick up this drop, leaving a pretty wild sell tail in the B-period. The market was one-time framing up intraday, with a range extension occurring during the F-period, leaving behind single prints. Notably, the VIX broke below its support level of 14.96 as early as the D-period, indicating the possibility of a potential pop higher towards the last upside target of 4565 was in play. The buyers came within 4 handles of reaching 4565, touching the weekly VWAP, which then triggered significant market sell orders, leading to a notable reversal. I shared a visual representation of this sequence on Twitter, which is worth checking out (link). The reversal intensified with emotional momentum as sellers successfully drove the market to print new daily lows, eventually reaching the prior multi-week balance high. With value overlapping higher, both the ONH and IBH taken out, and a double distribution to the upside at one point, a complete collapse was not something I had anticipated. It certainly caught many participants off guard, who were looking for an afternoon pullback low. The VIX closed above its resistance, as a result.
Friday’s session resulted in an outside day down, closing right at the prior multi-week balance area high of 4498, which will be my level of interest in the short-term. Another critical level is Friday's low of 4493.75, which represents both the daily and weekly balance low. Contextually, this is not an ideal location to short, unless value starts to establish below 4498. Failure to hold below 4498 targets fills of Friday’s poor structure.
For tomorrow, the Smashlevel (Pivot) is 4498, representing the prior 4-week balance high. Holding above 4498 would target fills of structure towards 4520, as well as the last upside target of 4536, representing the 3DB VPOC. Break and hold below 4498, indicating that sellers maintain downside pressure, would target the unfilled gap at 4478.50, as well as the last downside target of 4465, representing the spike base from the 7/11 session.
Going into tomorrow's session, I will observe 4498.
Holding above 4498 would target 4520 / 4536
Break and hold below 4498 would target 4478 / 4465
Additionally, pay attention to the following VIX levels: 18.08 and 16.12. These levels can provide confirmation of strength or weakness.
Break and hold above 4536 with VIX below 16.12 would confirm strength.
Break and hold below 4465 with VIX above 18.08 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.