ES Daily Plan | January 18, 2024
ES Daily Plan | January 18, 2024
My short-term reference point will be the unfilled gap at 4779.50, coinciding with the YTD VWAP.
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
Our main focus ahead of today’s session was the Tuesday afternoon rally high of 4801. Despite the reference being weak, buyers failed to break it during the overnight session, with the ON high printing at 4800.75. The subsequent weakness retraced yesterday's closing bounce, consequently clearing all downside targets down to 4767.
The RTH session opened with a true gap to the downside, and the conditions were quite straightforward. The final downside target was 4767, with the RTH open at 4766 and the ON low at 4765, making this area a clear inflection point. Sellers aimed to maintain control below this level to pursue a downside continuation, especially with an elevated VIX. On the other hand, buyers needed to reclaim this area to trigger an inventory correction, given that overnight inventory was nearly 100% net short. No surprise, 4765 emerged as the most traded price by volume during the initial balance, confirming its importance.
Despite sellers gaining control of the opening level and breaching the ON low during the A-period with a negative delta of 15K, they struggled to drive the price lower, lacking the necessary downside pace. The subsequent formation of a poor low during the initial balance served as a signal not to press too hard on the short side, considering we had already experienced an additional 10-handle drop from 4767. A short-covering bounce unfolded, but the passive sellers at 4775s were quick to stall that upside momentum, triggering another leg to the downside in the PM session. The PM session unfolded similarly to yesterday, marked by the formation of an excess low and concluding with a closing bounce. The key will be to monitor for continuation.
My short-term reference point will be the unfilled gap at 4779.50, coinciding with the YTD VWAP. Filling the gap with established acceptance within Tuesday’s range would target the high volume node (HVN) at 4814, acting as an upside magnet. Inability to fill the gap and remaining below the YTD VWAP favors a downside continuation, targeting the lower end of the highlighted 4-week balance area.
For tomorrow, the Smashlevel (Pivot) is 4779.50, representing today’s unfilled gap. Break and hold above 4779.50 would target the 1/16 afternoon rally high at 4801, as well as the final upside target of 4813, representing both short and medium-term value. The highlighted resistance area from 4814 to 4824 is the critical area that, when breached, unlocks the potential for an upside continuation, targeting the unfinished business. Holding below 4779.50 would target a downside continuation towards 4765, 4748, and the final downside target of 4730, representing the Weekly Extreme Low.
Levels of Interest
Going into tomorrow's session, I will observe 4779.50.
Break and hold above 4779.50 would target 4801 / 4814
Holding below 4779.50 would target 4765 / 4748 / 4730
Additionally, pay attention to the following VIX levels: 15.48 and 14.10. These levels can provide confirmation of strength or weakness.
Break and hold above 4814 with VIX below 14.10 would confirm strength.
Break and hold below 4730 with VIX above 15.48 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.
Hey smash. Is NQ Substack coming soon
You have smashed this week buddy!