ES Daily Plan | June 14, 2023

The buyers held what they needed to hold during the usual CPI volatility, resulting in a continuation of the trend of forming higher highs and higher lows. PPI and FOMC tomorrow.

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Contextual Analysis

Just a reminder that I have transitioned to the ESU23 (September) contract. Please note that I do not back-adjust my charts. I suggest marking 4304.75 (Friday’s ESM23 settlement) on your chart, as roll gaps often tend to get filled.

The momentum from yesterday's PM-session carried over into the overnight (ON) session, as prices immediately began exploring levels above the previous day's high. After the release of the CPI data, the market displayed its usual volatility, resulting in a test of the lower end of yesterday's upper distribution (ONL: 4381.75) and coming close to reaching the last intraday upside target of 4418 (ONH: 4415.50). The VIX went negative during the CPI data release, but it remained above its support level of 14.28.

The RTH session opened with a true gap to the upside, indicating that the session opened completely outside of the previous day's range. The immediate dip was bought against the FS VWAP, and the buyers were targeting the ON high, which is a critical reference point when dealing with gaps to the upside. If there is an early inability to break and sustain a move above the ON high, it can create opportunities to fade the market. What made this particular fade setup intriguing for today's session was that the ON high was 4415.50, while the last upside target was 4418. Additionally, the VIX did not confirm the strength, as it remained above the support level of 14.28. The buyers briefly explored prices above 4418. Subsequently, we observed some weakness after returning within the overnight range. If fading, you know that you are initiating trades against the trend, implying the need to adjust your target expectations accordingly. Nailing a good counter-trend trade is satisfying, but allowing it to end up break-even or even in the red due to unrealistic target expectations can ruin the whole session. The rest of the session was fairly quiet, with the buyers holding the gap, but having trouble gaining traction above 4418. By following the simple rule of not chasing above the last yellow upside target, one can often prevent oneself from facing unnecessary trouble.

For new followers, the yellow levels highlighted at the bottom left are the primary levels that I focus on intraday. My strategy for preventing impulsive decisions at unfavorable locations involves following a simple yet effective rule of exercising caution when initiating trades outside of the yellow levels. This implies that I am cautious chasing longs above the last yellow upside target and shorts below the last yellow downside target.

Today’s session was fairly balanced, leaving a poor high to carry forward. The market is currently trading within the weekly resistance area, which is always a little tricky to navigate, especially during the early stages of the week. The market is one-time framing up across all time frames. The primary objective for sellers is to put an end to the daily one-time framing up by breaching 4396, and their most favorable scenario would involve a daily close below the last downside target of 4380 in tomorrow's case. As long as that scenario does not occur, the buyers are not facing any huge trouble. Note that the Monthly Extreme high (June) at 4410 was today’s most traded price by time (TPOC). My short-term level of interest is today’s critical level of 4418. Tomorrow, PPI and FOMC.

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Going into tomorrow's session, I will observe 4418.

• Break and hold above 4418 would target 4430 / 4452

• Holding below 4418 would target 4403 / 4389 / 4380

Additionally, pay attention to the following VIX levels: 15.36 and 13.86. These levels can provide confirmation of strength or weakness.

• Break and hold above 4452 with VIX below 13.86 would confirm strength.

• Break and hold below 4380 with VIX above 15.36 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.