ES Daily Plan | December 7, 2023
Today’s session formed a triple distribution to the downside, featuring two sets of single prints in the B and L-periods, following the failure of buyers to sustain the true gap higher.
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 established three sets of single prints after buyers were able to take out the Smashlevel of 4579 in the early stages of the Asian hours. The 4579 level was defended during the European session (Low: 4580), leading to an upside continuation and the attainment of the initial upside target at 4593, located within Friday’s highlighted upper distribution.
The overnight strength led the RTH session to open on a true gap to the upside, marked by the opening price at 4597. A true gap occurs when the RTH session opens completely outside of the previous day’s range. Personally, a “gap and go” scenario lacked appeal, especially considering that the final upside target for the session was at 4605, which was 8 handles higher, and the multi-day balance high situated at 4607. Two crucial references for buyers when gapping higher are the ON high and the opening level. Generally, maintaining above these reference establishes a challenging environment for sellers. However, today, buyers fell short of testing the ON high and were unable to sustain the opening level, prompting an inventory correction, filling the gap. While filling the gap isn't the strongest response from buyers, it doesn't turn bearish unless acceptance is reestablished within the previous day’s range. The gap-fill triggered a brief bounce, yet its momentum proved short-lived. Sellers started gaining traction withing the previous day’s range in the latter part of the B-period. Once the C-period fell short of filling the B-period single prints, it became evident that today's gap higher had failed decisively, meaning the downside targets of 4565, 4555 and 4545 became appealing. Sellers came within 7 handles of reaching the final target of 4545. I will provide a visual of the C-period from an order flow perspective, highlighting the absorption of market buyers.
Today’s session formed a triple distribution to the downside, featuring two sets of single prints in the B and L-periods, following the failure of buyers to sustain the true gap higher. The closing session additionally saw a downward spike. However, the daily time frame remains in balance, currently a 10-day balance. In balanced market conditions, there is a tendency to resolve poor structure, in contrast to breakout situations where structural deficiencies can remain unresolved for prolonged periods, which is worth keeping in mind. My short-term focus will be on the breakdown single prints in the L-period at 4565. The more aggressive level to observe is the M-period spike base of 4557. Sellers aim to maintain below this 4565-4557 area, targeting the multi-day balance low, and a potential breakdown, which would target the high volume node (HVN) at 4520. Buyers aim to negate the closing weakness by establishing acceptance back within today’s middle distribution, targeting fills of today’s poor structure.
For tomorrow, the Smashlevel (Pivot) is 4565, which represents the breakdown single prints in the L-period. Break and hold above 4565, indicating rejection of the closing weakness, would target 4579, as well as the final upside target of 4593, effectively cleaning up today's structure. Holding below 4565, indicating acceptance, would target 4557, as well as the lower end of the 10-day balance area at 4545. Break and hold below 4545 would target the next support area from 4530 to the Weekly Extreme Low of 4520, where buying activity can be expected.
Levels of Interest
Going into tomorrow's session, I will observe 4565.
Break and hold above 4565 would target 4579 / 4593
Holding below 4565 would target 4557 / 4545 / 4530 / 4520
Additionally, pay attention to the following VIX levels: 13.56 and 12.38. These levels can provide confirmation of strength or weakness.
Break and hold above 4593 with VIX below 12.38 would confirm strength.
Break and hold below 4520 with VIX above 13.56 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! Another green day, scalped longs, but after that shorts were the highlight of the day. Levels kept me on the right side of the market.
Great stuff smash! Thank you!