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ES Daily Plan | June 12, 2023
Starting tomorrow, I will transition to the ESU23 (September) contract. In terms of immediate focus, I'm keeping an eye on Friday's afternoon rally high at 4358 (ESU23), where sellers were active.
As mentioned in the Weekly Plan published yesterday, starting tomorrow, I will transition to the ESU23 (September) contract. Please note that I do not back-adjust my charts. On the chart, I have marked the settlements for both ESM23 (June) (4304.75) and ESU23 (September) (4348.75) from Friday’s session (+44 difference). I suggest marking 4304.75 on your chart, as roll gaps often tend to get filled. The levels for tomorrow’s session are based on Friday’s session from the ESU23 (September) contract. Contract rollovers often give rise to confusion. While some traders choose to back-adjust their charts, I personally prefer to keep my past levels unchanged without adopting this approach. This method suits my personal style as it enables me to maintain simplicity. Tomorrow, I will simply deal with the roll gap. Nevertheless, tomorrow's intraday levels (yellow levels) are the same whether you back-adjust or not, which is the important thing.
On Friday, the buyers wanted to see consolidation at the upper end of the multi-day balance area, which would increase the likelihood of a breakout attempt. The majority of the overnight (ON) session was consolidating at the balance highs, except for a liquidation break during the opening of the European session. This drop quickly found buying interest at the pivotal level of 4285.
As soon as the regular trading hours (RTH) session opened (true gap to the upside), the breakout quickly materialized following a lack of trading interest below the opening level. The last intraday upside target, as outlined in the previous daily plan, was at 4327.50. The buyers almost reached their target, missing it by a mere 2 handles (HOD: 4325.50). However, the VIX was not on the side of the buyers (by holding above 12.98), signaling a need for caution when it came to chasing the market as it approached the 4327 level. Conversely, if you were in a long position, you could consider using this divergence as a signal to exit. A poor high was established in B/C-period, indicating crowded buyers. This often leads to a reaction where prices move away from that area to shake out those poorly located longs. During this pullback, the VIX actually went positive. Eventually, the actual gap was filled, and a poor low was established in the process. As a result, an afternoon rally ensued.
Friday’s profile has unfinished business at both extremes. The market is one-time framing up across all time frames, indicating that buyers are in full control of the auction. My short-term level of interest is the afternoon rally high at 4358 (ESU23), where sellers were active. Holding below primarily targets the poor low, while regaining acceptance above would target an upside continuation of the daily imbalance.
Going into tomorrow's session, I will observe 4358.
Break and hold above 4358 would target 4369 / 4380
Holding below 4358 would target 4339 / 4327 / 4318
Additionally, pay attention to the following VIX levels: 14.54 and 13.12. These levels can provide confirmation of strength or weakness.
Break and hold above 4380 with VIX below 13.12 would confirm strength.
Break and hold below 4318 with VIX above 14.54 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.