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ES Daily Plan | January 19, 2023
Today we saw a triple distribution trend day down, as sellers were able to end the daily one time framing up, taking out four daily lows in the process.
Please note that this newsletter has undergone a name change from 'ES/SPX Daily Trading Plans' to 'Smashelito's ES/SPX Newsletter'.
Recap & Plan
During the ON session, the trading mostly stayed within the range of the previous day, with the exception of a short period in the Asian session where the weekly level of 4002 was briefly breached but not sustained. There was notable activity in the orderflow at 4020.25 (Smashlevel 4020) during the volatile period that caused a sharp move of 30 handles. We eventually retested that area during the European session, and rejected. We went through another period of volatility ahead of the RTH Open, caused by the PPI data, which retested the excess from the previous day's B-period, and found selling activity.
The RTH opened above 4020, and a distribution was formed between 4031 and 4020 during the initial balance. Yesterday's B-period excess was also retested during RTH, but it was quickly rejected after spending a short time there, which was significant. We saw a range extension to the downside in C-period after very aggressive selling, resulting in a test of the weekly level 4002 and sellers finally managed to end the daily one time framing up in the process. The failure to fill the C-period single prints and trading below the important levels of 4020 and 4002 provided a significant amount of market generated information. All intraday downside targets down to 3960 were reached. It is worth noting the distribution that formed around 3960. The correlation with VIX was noteworthy throughout the session. We saw the market holding just below the resistance level of 20.23 for several periods, and it's interesting to note that the breach of this level preceded the drop to 3960 in H-period. Sellers were unable to follow through despite a confirmation of VIX, mainly because we barely had a pullback since the breakdown single prints in C-period. VIX did fall back below 20.23, which offered some good counter-trend trading opportunities from 3960. However, the second time resistance (VIX) was broken, it led to a downside follow through, resulting in a spike down. This provided an indication that the odds were not in favor of a closing rally, even though there was a possibility for one when VIX fell back below 20.23 initially.
We end up with a triple distribution trend day down with three sets of single prints, very emotional price action. Note that only two of the single prints are visible on the chart, the third one is around 3973. Also, note how today’s trend day took out four daily lows in total. In the Weekly Plan, we discussed the three prior daily lows and the potential for a stop-hunt if the sellers were able to end the daily OTFU. It is worth noting that we are now trading within the support area for the Weekly Plan, meaning an area where buyers want to be active. Weekly is still one time framing up (3897.25) and daily is now in a 5 day balance. Today’s low is the bottom of the balance, meaning if breached, daily is one time framing down.
Sellers want a fairly quick follow through as we are at the bottom of the balance, which would target a traverse of the 1/10 range to test the Weekly Extreme Low 3910. Conversely, buyers want to see a rejection of the lower prices for a traverse of the highlighted lower distribution. A break and hold above 3985 with a cooperative VIX have the potential for some clean up of the poor structure. Observe if there are any responsive sellers within the highlighted areas of poor structure.
Tomorrow, pay attention to two additional VIX levels: 21.34 and 19.34. These levels can provide confirmation of strength or weakness. If we break and hold above 3985, a VIX below 19.34 would confirm strength. If we break and hold below 3900, a VIX above 21.34 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.
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