ES Daily Plan | July 20, 2023

Contextually, not much has changed after today.

Since the sellers faced difficulties gaining acceptance within the previous day's range, I will monitor whether their struggle persists by observing 4594 in the short-term.

ES Daily Plan | July 20, 2023

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Contextual Analysis

Considering the lack of noteworthy events during today's session, I'll keep this brief. During the overnight (ON) session, trading occurred within yesterday's upper distribution, indicating a lack of interest in cleaning up the poor structure left behind. This, in itself, serves as a bullish indication. ON low: 4582.25 (Smashlevel: 4583).

The RTH session actually opened with a true gap to the upside (3 ticks), and the market started to rally right out of the gate, leaving the gap unfilled. During the C-period, the gains from the opening were quickly retraced (gap filled), as the market failed to reach the next upside target of 4611. The sellers made six different attempts to trade within yesterday's range but were ultimately unsuccessful in gaining traction. The most evident rejection in terms of order flow, occurred during the J-period when an iceberg order was present. A passive buyer positioned at 4589 (blue arrow) absorbed the aggressive sellers' attempts to push the price lower, as they lacked the size to do so effectively. As a result, a solid reversal worth ~15 handles occurred, which was significant considering today’s very narrow range. A recap of this sequence will be posted on Substack.

Visual of the absorption in J-period.

Nothing has really changed contextually following today’s session. The ongoing daily one-time framing up pattern remains intact, and the primary objective for sellers is to bring it to an end, as we have discussed since Thursday’s session last week, when I added the illustration to the right. In contrast to yesterday’s emotional session, which left behind very poor structure, as observed in the profile, today’s profile was perfectly balanced. This type of price action following an emotional day prior is not uncommon. Note that the market is currently trading within the weekly resistance ranging from 4590-4620 (from Weekly Plan). Since the sellers faced difficulties gaining acceptance within the previous day's range, I will monitor whether their struggle persists by keeping an eye on Tuesday’s high of 4594 in the short-term.

For tomorrow, the Smashlevel (Pivot) is 4594, representing Tuesday’s high. Holding above 4594 would target 4606, where sellers stepped in during L-period. Break and hold above 4606 would target 4620, as well as the last upside target of 4631, representing the Weekly Extreme High and the March High of 2022, respectively. Break and hold below 4594 would target the lower end of Tuesday’s upper distribution at 4583, as well as the last downside target of 4570. The most favorable scenario for sellers would involve negating Tuesday’s trend day by establishing acceptance within the lower distribution, where the short-term value of 4546 can act as a downside target.

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Going into tomorrow's session, I will observe 4594.

• Holding above 4594 would target 4606 / 4620 / 4631

• Break and hold below 4594 would target 4583 / 4570

Additionally, pay attention to the following VIX levels: 14.48 and 13.04. These levels can provide confirmation of strength or weakness.

• Break and hold above 4631 with VIX below 13.04 would confirm strength.

• Break and hold below 4570 with VIX above 14.48 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.

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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.

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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.