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ES Daily Plan | July 17, 2023
The market is currently one-time framing up across all time frames.
As Friday's session closed below its value area low, I will observe buyers’ ability to regain acceptance within the value area in the short-term.
Friday’s overnight (ON) session was fairly quiet, as the market filled the highlighted area of poor structure from Thursday’s session. After a 12-hour period of consolidation, the buyers were able to gain traction to the upside prior to the opening of the RTH session.
The RTH session was interesting as the market quickly established a higher high, but struggled to maintain the momentum for further continuation. The high set during the initial balance (first hour of RTH), remained the high of the session (11 ticks of excess). The sellers managed to regain acceptance within Thursday's range, essentially replicating what occurred during the overnight session in filling the poor structure from Thursday. It is not uncommon to witness this type of price action when the market becomes excessively extended beyond the Weekly Extremes (with the prior Weekly Extreme High at 4525), and the short-term value is not following price, remaining at 4438. As highlighted in the previous daily plan, this is precisely why I tend to exercise caution when it comes to chasing emotional trades beyond the weekly extremes. Instead, I prefer adopting a more defensive approach, regardless of whether the market continues its upward trajectory or not. Friday’s closing weakness came 6 handles shy of retesting 4525.
The market is one-time framing up across all time frames since the breakout from the multi-week balance area, indicating that buyers are in full control of the auction. The primary objective for sellers is to put an end to the daily one-time framing up, and until that occurs, maintaining a bearish stance becomes quite challenging. It is worth emphasizing that the short-term value (5-day VPOC) is currently nearly 100 handles below Friday's settlement. With that being said, the main objective for the buyers is to migrate the short-term value higher to accept the higher prices following the breakout. Overall, the buyers are not facing significant trouble as long as the weekly breakout is maintained - trouble starts to kick in below. As Friday's session closed below its value area low (VAL), I will observe buyers’ ability to regain acceptance within the value area.
For tomorrow, the Smashlevel (Pivot) is 4540, representing Friday’s value area low (VAL), and the area where change took place during the closing session on Thursday. Break and hold above 4540 would target a value area traverse towards 4555, as well as the last upside target of 4570, in the case of continued strength. Holding below 4540 would target the support area ranging from 4525 to 4516, as well as the last downside target of 4498 (prior multi-weak balance high), in the case of continued weakness. The most bearish outcome would involve a break and hold below 4498, which would put the weekly breakout into question.
Going into tomorrow's session, I will observe 4540.
Break and hold above 4540 would target 4555 / 4570
Holding below 4540 would target 4525 / 4516 / 4498
Additionally, pay attention to the following VIX levels: 14.02 and 12.66. These levels can provide confirmation of strength or weakness.
Break and hold above 4570 with VIX below 12.66 would confirm strength.
Break and hold below 4498 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.
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.