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ES Daily Plan | January 30, 2023
Friday's session ended with a higher high and a higher low, with value migrating cleanly higher. Buyers are in control until proven otherwise.
Sellers main objective is to end the daily one time framing up.
The ON session on Friday was relatively calm, with trading taking place within a tight range of 13 points below Thursday's spike base and Smashlevel 4070. 4070 was tagged almost to the tick (4070.25) ahead of the PCE data release, and price was rejected. A visual of this sequence, including a snapshot of the DOM, was posted on Twitter to illustrate the concept of an orderflow reversal. Buying effort stalls, followed by aggressive sellers coming in.
The RTH session opened at prior day’s value area high, and buyers attempted to regain the 4070 level. However, sellers initially managed to defend this level for the first 10 minutes of the session. Once 4070 was regained, there was a strong impulsive move to the upside that exceeded prior day’s high and reached the opening level of December month, where the move exhausted. Review the daily recap from Friday’s session. A passive seller was sitting at 4090, absorbing that buying effort and we could clearly observe how aggressive sellers stepped in once we traded back below that 4090 level. It was now the buyers turn to attempt to defend Smashlevel 4070. Sellers managed to break 4070 for a brief moment at the end of C-period, but failed to take out the initial balance low. The lack of interest in trading within Thursday's value area revealed much about the state of the sellers, who also formed a poor-ish low. We have two consecutive poor daily lows to carry forward. For the remainder of the session, the market trended upward, and we saw a test of the Weekly Extreme High of 4105, a level posted last Saturday. This triggered a closing sell-off. It’s worth noting that the VIX didn’t indicate any strength and in fact was rising along with the ES ahead of the test of 4105. Having that said, if you haven’t placed a long trade throughout the week, initiating new long positions at the Weekly Extreme High on a Friday wasn’t considered a favorable location. However, if you were already in long positions, it was a good opportunity to book profits, and it’s likely that many traders did so.
The session ended with a higher high and a higher low, with value migrating cleanly higher. We broke out from the 3 day balance on Thursday, and this directional move to the upside continued on Friday. It’s difficult to determine the impact of Friday's closing sell-off, which means that I’m cautious with any shorts until sellers manage to end the daily OTFU. Remember, we are OTFU on both the daily and weekly time-frame. However, we are approaching the 4 month balance high of 4141, which makes it a tricky location for initiating longs as well. 4141 along with the Monthly Extreme high of 4125 are the obvious upside targets, should we continue this directional move. 4125 coincides with the last intraday upside target for tomorrow. If sellers can successfully end the daily OTFU, the obvious downside target is the “Battlefield” area, where there is a high volume node, previous week’s VWAP and the prior 5 day balance high. This area coincides with the last intraday downside target.
Going into tomorrow's session, I will observe 4080.
Holding above 4080 would target 4095 / 4110 / 4125.
Break and hold below 4080 would target 4070 / 4042.
Additionally, pay attention to two additional VIX levels: 19.45 and 17.55. These levels can provide confirmation of strength or weakness. If we break and hold above 4125, a VIX below 17.55 would confirm strength. If we break and hold below 4042, a VIX above 19.45 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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