ES Daily Plan | February 10, 2023

For tomorrow, I'm keeping my approach straightforward. The session ended with a spike down, with a base at 4086.

Sellers want a break and hold below fairly quickly or we start rotating back to the short-term value.

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Contextual Analysis

During the ON session, there was no interest in any price exploration below the prior day's low, despite closing at the lower end of the range. We observed a complete traverse of the inside day, and there was an attempt to break to the upside after forming a double distribution. The highest point reached during the ON session was 4070.25, which was 4.75 handles away from the last intraday upside target for the session. This presented a good opportunity to close long positions and avoid chasing the market before the RTH had opened. As mentioned in the previous plan, the potential for an upside break of the inside day was limited due to 4175 being the last target.

The RTH session opened at the upper end of the inside day and failed to breach both the ON high and the high of the inside day, forming a weak high. Failed breakout in the ON session and early weakness in RTH were warning signs, as it indicated that the target could be on the other side of the inside day. First up was a test of Smashlevel 4141, which only resulted in a shallow 10 handle bounce during the B-period. The C-period failed to reach the upper distribution from the ON session, leaving underwater longs who held their positions after the first inventory correction without a second opportunity to exit. In the D-period, 4141 was breached, resulting in single prints and effectively erasing the entire upward move from the ON session. The F-period offered an excellent opportunity for a short, as it marked the end of the intraday one time framing down and retested 4141 from below. This was a textbook example of an order flow reversal. I shared a visual representation of this sequence on Twitter, you may want to check it out.

Smashelito @smashelito

$ES An ideal demonstration of an orderflow reversal at the retest of Smashlevel 4141. 1. Level of interest 2. Absorption 3. Buying effort stalling 4. Aggressive sellers join 5. Stops triggering #footprint #orderflow #smashlevels

Smashelito @smashelito

$ES Today's session resulted in an inside day, forming a double distribution with one set of single prints. The general rule is to go with the break of the inside day. We continue to consolidate above the FOMC breakout. Smashlevel: 4141 $VIX $SPY $SPX #ES_F #plan #smashlevels https://t.co/etPwrHdwSh

As previously discussed, a break to the downside of the inside day had greater potential, and we saw this break occur during the G-period. The H and I-periods provided opportunities for short setups in anticipation of further downside movement. It's crucial to keep in mind that at this stage, the last intraday downside target was still 35 handles away at 4090, which means that it was much better location to short, than it was to go long at RTH open. The target of 4090 was reached in the L-period, and with the VIX already above 20.60 before reaching 4090, we observed a flush into the closing session. The poor structure from 2/1 is now fully cleaned up, and we carry forward today’s poor structure. The M-period had a delta of +5486, meaning sellers want a follow-through fairly quickly.

For tomorrow, I'm keeping my approach straightforward. The session ended with a downward spike, with a base at 4086. If we hold above, the upside magnet is the 5D VPOC of 4125, which is a potential reload area for sellers. Sellers don’t want any acceptance back above 4141, as this could trigger short-covering. If we break and hold below 4086, the downside magnet is the Weekly Extreme Low of 4040 and the 20D VPOC of 4030, which is an area where buyers want to be responsive.

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Going into tomorrow's session, I will observe 4086.

• Break and hold above 4086 would target 4115 / 4125 / 4141

• Holding below 4086 would target 4075 / 4055 / 4040 / (4030)

Additionally, pay attention to the following VIX levels: 21.80 and 19.62. These levels can provide confirmation of strength or weakness.

• Break and hold above 4141 with VIX below 19.62 would confirm strength.

• Break and hold below 4040 with VIX above 21.80 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.

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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.

ES Weekly Plan | February 6-10, 2023

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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.
Twitter: @smashelito | FAQ: smashelito.com