ES Daily Plan | July 27, 2023
Despite the FOMC's volatile moves, the overall context of the market remains unchanged, underscoring the need to remain adaptable.
I'm observing 4606 in the short-term, as aggressive buyers got trapped in that area.
Contextual Analysis
The Asian session remained relatively uneventful. Just before the European session opened, the market pushed higher towards the Smashlevel of 4589. Although the price was initially rejected at this level, the buyers eventually managed to break through. At 4590, there was notable order flow activity, as passive sellers were reloading. This resulted in a decent drop before the opening of the regular trading hours (RTH).
Prior to the FOMC meeting, the RTH session remained largely uneventful, with the Smashlevel of 4589 acting as a resistance and capping the upside consistently for five hours. As usual, the market underwent volatility during FOMC. As mentioned yesterday, it’s usually a good idea to go flat 30 minutes before the event and save your mental capital for Thursday and Friday, which are generally much better days to focus on. In the K-period, the market made a strong effort to break above 4606, effectively cleaning up the weak high. However, the lack of follow-through led to a decent fade setup. Note the aggressive buyers/passive sellers above 4606 on the delta profile. I pointed out the short setup in yesterday's composite profiles, but my preference was for a more significant push higher, rather than just a mere 6 ticks. In my view, the most favorable scenario for sellers would be to complete the P-shape profile imbalance to the upside by breaking out of the current balance area and establishing excess. Subsequently, it would be ideal for the market to fail in migrating value higher and instead return within this balance area. Anyway, day-by-day navigation remains paramount.
The market remains in a state of consolidation, awaiting further market-generated information. Although a new high was printed (6 ticks of excess), I will continue to interpret the daily as balance, now extending into a 7-day balance. Remember that the longer a consolidation lasts, the more significant the move out of it tends to be. The medium-term value (20-day VPOC) has shifted higher from 4485 to 4587, which serves as a bullish indication in context of the recent directional upward move. I will observe 4606 in the short-term, which was tested immediately after hours.
For tomorrow, the Smashlevel (Pivot) is 4606, as it was the area where buying activity was concentrated during today's K-period. Break and hold above 4606, indicating a successful breakout, would target 4620, as well as the last upside target of 4631. The Weekly Extreme High is located at 4650, in the case of continued strength. Holding below 4606 would target the support area from 4589 to 4579, where both the short- and medium-term value is located. Break and hold below 4579 would target the last downside target of 4558. In the event of further weakness, the 7-day balance low is located at 4545.
Going into tomorrow's session, I will observe 4606.
Holding above 4606 would target 4620 / 4631
Break and hold below 4606 would target 4589 / 4579 / 4558
Additionally, pay attention to the following VIX levels: 13.82 and 12.54. These levels can provide confirmation of strength or weakness.
Break and hold above 4631 with VIX below 12.54 would confirm strength.
Break and hold below 4558 with VIX above 13.82 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.
DOW has logged 13th consecutive day positive, and ON session is favorable to buyers. Slow grind continues
Great play. Thank you