ES Daily Plan | June 15, 2023

After reversing the flush in J-period, the market wrapped up with minimal changes. The daily has returned to a 2-day balance.

Will the balance be short-lived, or will the market experience two-sided activity?

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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 Asian hours of the overnight (ON) session remained quiet, similar to recent sessions, with the Smashlevel of 4418 holding up as resistance. As soon as the European session opened, the pace of market activity picked up, and buyers explored prices above prior day’s high, breaching the poor high. The ON high of 4428, was 2 handles away from the Weekly Extreme high of 4430, provided in the Weekly Plan last Saturday.

The RTH session opened within yesterday’s range, around the value area high and 4418. A quick look below and fail of the 4418 offered one of the more advantageous trading opportunities of the day. This setup was particularly interesting after observing the order flow. Despite significant selling activity at 4415, sellers were unable to generate downward momentum (absorption) and were immediately met with an opposite response.

As always with FOMC, it is notably less risky to engage in trading activities before the meeting and it is usually a good idea to close all positions 30 minutes prior to the event. The buyers made an attempt above 4430 in D-period, resulting in the establishment of an excess high. This excess high serves as a reference point that buyers aim to take out quickly. The market returned to 4418 prior to FOMC, waiting for the shenanigans to start in J-period. The J-period flushed hard (negative delta of 9K at one point), resulting in breaching the previous day’s low, filling the gap and testing the highlighted yellow support area where the last downside target of 4380 was located. Throughout this liquidation phase, the VIX remained unaffected and, interestingly, it remained negative throughout the entire session. This clearly indicated that it was not the appropriate moment to allow emotions to impact your decision-making process. Traders got caught selling at poor location, fueling a sharp reversal which fully filled the large set of J-period single prints. Note where the L-period high found resistance.

The daily has returned to a 2-day balance, indicating that the market is currently undergoing a short pause following a phase of imbalance. The market concluded the session with minimal changes, demonstrating a second close within the weekly resistance area. The buyers aim to establish acceptance above 4430 and challenge today's excess (balance high), which has potential to trigger a squeeze. Conversely, the sellers don’t want the excess high taken out, and their most favorable scenario would involve a downward break of the 2-day balance area, with a daily close below 4380. Short-term value shifted from 4275 to 4417, indicating an acceptance of higher prices.

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

• Holding above 4418 would target 4430 / 4452

• Break and hold below 4418 would target 4396 / 4380

Additionally, pay attention to the following VIX levels: 14.58 and 13.18. These levels can provide confirmation of strength or weakness.

• Break and hold above 4452 with VIX below 13.18 would confirm strength.

• Break and hold below 4380 with VIX above 14.58 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.