ES Daily Plan | December 21, 2023
Once more, the session closes with a spike, but this time to the downside, with the base at 4761—a level of interest in the short-term.
Visual Representation
For new followers, the yellow levels highlighted at the bottom are the primary levels that I focus on intraday. My strategy for preventing impulsive decisions at unfavorable locations involves following a simple yet effective rule of exercising caution when initiating trades outside of the yellow levels. This implies that I am cautious chasing longs above the final yellow upside target and shorts below the final yellow downside target. It is crucial to understand that refraining from chasing a trade is not an automatic invitation to initiate a trade in the opposite direction.
Contextual Analysis
The overnight session printed a new ATH during the Asian hours, following the break of the previous day’s high. However, the price exploration above the previous day’s high proved short-lived as weakness developed during the European hours, leading to a cleanup of the prior ATH at 4808.25, which was weak.
Once more, the RTH session opened with strength, characterized by minimal trading activity below the opening level. The auction stalled momentarily for 15 minutes in the A-period at our intraday pivot of 4817, as traders were battling. Subsequently, the B-period exploded to the upside, forming single prints. Buyers controlled the auction, taking out the ON ATH, as responsive buyers remained active within the B-period single prints. As a result, the initial upside target of 4828 was reached in the G-period. The PM session caught numerous traders off guard with a vicious liquidation break. I mentioned yesterday that should 4855 be reached, it would be a good area to book profits and play defense, considering the location of the short-term value (5D VPOC) at 4767. Obviously, we didn't quite reach that level before the liquidation occurred. While the liquidation break itself wasn't a massive surprise, given the weak underlying structure, as traders, we cannot predict exactly when such events will unfold. This is why we rely on levels, structure as guidance, and consistently incorporating stops in our trading approach. The afternoon weakness quickly retraced to the 5D VPOC, taking out three daily lows in the process and bringing the daily back to balance, which has been the main objective for sellers. Sellers achieve their first close below a final downside target (4792 in today's case) in quite a while—a noteworthy shift in dynamics. It remains to be seen how this will influence tomorrow's trading session. I will provide a visual of today’s correlation between the ES and the VIX levels from the previous plan on Substack, highlighting why chasing bounces was not optimal following the break of 4792.
If you've had a challenging trading session, my advice is to refrain from Twitter and, instead, invest that time in analyzing what went wrong. This approach is essential for improvement and learning from the experience.
Today's session unfolded as an outside day down, following the weakness developed in the afternoon session. The daily has returned to a 5-day balance by breaking a total of three daily lows in the process. Once more, the session closes with a spike, but this time to the downside, with the base at 4761—a level of interest in the short-term. The conditions are straightforward: acceptance of the lower prices of the spike would target the poor structure from the FOMC breakout. Conversely, a rejection would primarily target the resistance area from 4782 to 4792—a crucial area for sellers to defend and buyers to regain.
For tomorrow, the Smashlevel (Pivot) is 4761, representing today’s spike base. Break and hold above 4761 would target the resistance area from 4782 to the final upside target of 4792, representing the previous week’s high. This is a crucial area for buyers to regain. Holding below 4761, signaling sustained weakness, would potentially lead to a breakdown from the 5-day balance area and target the support area from 4735 and 4725. In the case of continued weakness, the target is fills of the FOMC breakout single prints towards the final downside target of 4709.
Levels of Interest
Going into tomorrow's session, I will observe 4761.
Break and hold above 4761 would target 4782 / 4792
Holding below 4761 would target 4735 / 4725 / 4709
Additionally, pay attention to the following VIX levels: 14.34 and 13.02. These levels can provide confirmation of strength or weakness.
Break and hold above 4792 with VIX below 13.02 would confirm strength.
Break and hold below 4709 with VIX above 14.34 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.
Weekly Plan
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.
Additionally, the final upside (4792) and downside target (4709) for tomorrow are very important, given how they represent clear inflection points. As always, monitor the VIX levels for potential clues should either target get reached.
Thank you buddy. Great as always. Have been green again today same as yesterday, but I liked the opportunity to the downside.