ES Daily Plan | December 5, 2023
Today, the double distribution trend day observed on Friday was negated, leading to a return to value. I have highlighted the main distribution of interest in blue on the composite volume profile.
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 sellers successfully managed to negate Friday’s double distribution trend day by taking out the intraday pivot at 4593 already in the early stages of the overnight session. The opening of the European session saw a bounce from the upper end of Friday’s lower distribution. However, sellers stepped in on the retest of 4593 from below, resulting in a downside continuation, forming single prints, and reaching the final downside target of 4569. It’s worth noting that I always book profits if the final downside or upside target is reached before the opening of the RTH session, regardless of whether the market continues its downside trajectory or not. This precaution is taken due to the increased risk of an inventory correction during the RTH session, particularly when the ON session has already covered significant ground.
With the overnight inventory being 100% net short, a counter auction is to be expected in RTH, and the absence of such a move would signal significant weakness. With the VIX confirming weakness after breaking and holding above its resistance level of 13.22, I was interested to see whether sellers would step in during a potential opening bounce. I relied on the breakdown single prints from the overnight session to assess the market. The RTH session saw an immediate inventory correction, with sellers reloading within the single prints from the ON session, resulting in another leg to the downside during the B-period. The next level of interest at 4555 stalled the downside pressure, as market sellers didn’t have size enough to push through the passive limit orders (absorption). A poor low formed, triggering short-covering.
Today, the double distribution trend day observed on Friday was negated, leading to a return to value. I have highlighted the main distribution of interest in blue on the composite volume profile located to the far right. Buyers aim to establish acceptance above the upper end of this distribution, targeting Friday’s upper distribution, while sellers aim to defend 4579, targeting a traverse to its lower end.
For tomorrow, the Smashlevel (Pivot) is 4579, which represents upper end of the main distribution highlighted in blue on the composite profile. Break and hold above 4579 would target fills of Friday’s structure towards 4593, as well as the final upside target of 4605, located at the upper end of the 8-day balance area. Holding below 4579 would target todays afternoon pullback low of 4565. Break and hold below 4565 would target the support area from 4555 to the final downside target of 4545.
Levels of Interest
Going into tomorrow's session, I will observe 4579.
Break and hold above 4579 would target 4593 / 4605
Holding below 4579 would target 4565 / 4555 / 4545
Additionally, pay attention to the following VIX levels: 13.66 and 12.46. These levels can provide confirmation of strength or weakness.
Break and hold above 4605 with VIX below 12.46 would confirm strength.
Break and hold below 4545 with VIX above 13.66 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.
Thank you, buddy! I went long at your Nov 21/22 level around 4554. I held it to VWAP; great play, green all the way.
Thank you!