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ES Daily Plan | February 28, 2023
Despite the buyers inability to sustain today's true gap up, which was disappointing, the daily has returned to a 3 day balance.
We are still trading around the short-term value of 4005 and waiting for more MGI.
The overnight (ON) session today was quite eventful as buyers managed to hold on within the range of Thursday's session. This led to some short-covering. The ON low was 3973, which was 4 ticks below our Smashlevel of 3974. The poor structure left behind from the liquidation during Friday's ON session, as is typical with such events, was cleaned up today. At the start of the European session, there was an impulsive upward move that broke through the high of the Asian session and formed single prints. For the rest of the European session, trading occurred within a narrow range, which the buyers were able to break out of before the RTH open.
The RTH session opened with a relatively large true gap up, and the buyers immediately participated in the shallow inventory correction that tested the second set of single prints from ON session. Buyers were able to take out the ON high, which is an important reference to hold above when we are dealing with true gaps to the upside. The last intraday upside target was 4028, and the high of today’s session was 4024.75. If you were long, this would have been a good opportunity to book profits rather than chase the market at this point. As we approached 4028, we noticed a notable divergence in delta, and the VIX was approaching the previous plan's support level of 20.54. That was good conditions for a potential reversal setup, and all that was required was confirmation of orderflow, which we received. I will share a separate visual representation of my Footprint chart, which demonstrates the delta divergence and the way in which aggressive sellers started hitting the bid, confirming the reversal.
The tape was fairly weak after that reversal. We were one time framing down intraday and ended up filling the single prints that were formed at the start of the European session. The trapped sellers from that area provided a decent bounce that retested the short-term value of 4005, which found selling activity. Eventually, new lows were established and the true gap up was completely filled.
Despite the buyers' inability to sustain the significant true gap up, which was disappointing, the daily has returned to a 3 day balance. While we continue to trade within this range and hover around the short-term value of 4005, it will be essential to remain flexible and adaptable. A bigger directional move will occur when we auction outside the balance area. Tomorrow marks the final day of the month, and the current monthly low is Friday's low of 3947.50. The monthly is as you know OTFU, and sellers big mission will be to end that by taking out the February low. Holding below 3995 is favoring a test of the balance low, while a break and hold above have potential for a test of the balance high.
Going into tomorrow's session, I will observe 3995.
Holding above 3995 would target 4005 / 4032
Break and hold below 3995 would target 3974 / 3955 / 3940
Additionally, pay attention to the following VIX levels: 22.02 and 19.84. These levels can provide confirmation of strength or weakness.
Break and hold above 4032 with VIX below 19.84 would confirm strength.
Break and hold below 3940 with VIX above 22.02 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. Twitter: @smashelito | FAQ: smashelito.com