ES Daily Plan | January 26, 2024
ES Daily Plan | January 26, 2024
Just like Tuesday, today’s session resulted in an inside day, marked by its price range being contained within the previous day’s range, implying short-term balance.
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 Smashlevel of 4899 was our level to closely monitor during today’s session, providing insight into whether additional weakness was in play or if Wednesday’s afternoon weakness would fuel another move to the upside. After briefly probing below Wednesday’s low and failing to sustain downward momentum, the market remained around the 4899 level throughout the overnight session until the release of data, which subsequently triggered a squeeze.
The RTH session opened within Wednesday’s range and value area, a scenario known to often present challenges for trading early in the session. The initial periods indeed reflected this complexity, as the market demonstrated indecision by repeatedly trading through the opening level. Buyers fell 4 handles short of reaching the final upside target of 4930 during the B-period. Change took place in the F-period as the market breached the initial balance low, leading to sellers taking control of the auction by selling bounces. This resulted in a test of the Smashlevel of 4899 during the J-period, where buyers were waiting. An excess low formed after another failure to take out a previous day’s low and end the daily one-time framing up—triggering a vicious squeeze into the closing session.
Just like Tuesday, today’s session resulted in an inside day, marked by its price range being contained within the previous day’s range, implying short-term balance. Responsive activity is expected within today's range, while a directional move requires acceptance beyond its extremes. A break to the upside would target 4944 and the significant 4960 level, while a downside break would target 4881. Note that the 5D VPOC remains at 4883. Will buyers be able to shift it higher, or will 4883 act as a downside magnet?
For tomorrow, the Smashlevel (Pivot) is 4930, representing the level at which aggressive buyers were absorbed and trapped on Wednesday’s session. Break and hold above 4930, indicating a successful breakout, would target an upside continuation towards 4944 and the final upside target of 4960, representing the Weekly Extreme High and the 100% range extension from the recent 4-week balance area (see Weekly Plan). Holding below 4930, indicating a lack of initiative buyers, would target the support area from 4910 to 4900. Acceptance below 4900 opens the door for a test of Tuesday’s afternoon pullback low of 4881, which aligns with the current short-term value (5D VPOC) at 4883.
Levels of Interest
Going into tomorrow's session, I will observe 4930.
Break and hold above 4930 would target 4944 / 4960
Holding below 4930 would target 4910 / 4900 / 4881
Additionally, pay attention to the following VIX levels: 14.02 and 12.88. These levels can provide confirmation of strength or weakness.
Break and hold above 4960 with VIX below 12.88 would confirm strength.
Break and hold below 4881 with VIX above 14.02 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.
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.
Thanks, my friend! Today's trading session was outstanding. I experienced some losses, but ultimately, I finished with substantial gains.
Hey Smash,
Is there a nuanced difference between reversal due to absorption and reversal due to exhaustion?
Because I often see both types of reversals when looking at order flow.
Also, is "Total Volume" important when identifying reversals?