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ES Daily Plan | June 22, 2023
Sellers controlling the auction in the short-term since retracing the trend day from last Thursday.
The question is, can sellers break the pattern of Thursdays and Fridays favoring buyers over the past few weeks?
The overnight (ON) session lacked significant activity, with trading mostly limited to a narrow range. The Smashlevel of 4428 was tested and defended during the start of the European hours, but it was ultimately breached before the RTH open.
The RTH session opened below yesterday’s value area, and it was evident that sellers emerged right from the start, aggressively hitting the bid. Within the first 15 minutes of RTH, there was a negative delta of ~4K. The first downside target was the unfinished business from the previous day’s low at 4411, which was accomplished already during the A-period (first 30 min of RTH). Following the clean up, the aggressive sell activity had trouble gaining further downside traction, as passive buyers successfully absorbed the market sell orders. Consequently, a new poor low was established, including three periods (B, C, and D) - carry forward. Following nine periods of trading within the initial balance range, the buyers attempted a range extension to the upside in J-period, resulting in a test of 4428 (HOD: 4430.75). This sequence was interesting as 4428 was our pivot for the session, and there was a notable divergence in cumulative volume delta (CVD). In addition to that, the VIX was hugging its support level of 13.18, adding further confluence. The market witnessed a drop of ~20 handles, characterized by good pace.
The daily is one-time framing down following the break of the 3-day balance low. If we take a look at the two highlighted gray boxes, the sellers managed to gap lower yesterday, and today’s session is basically confined within box #2, with another excess high. This suggests that the sellers are currently in control of the auction in the short-term. As I mentioned in the previous plan, the Monthly Extreme High (June) is situated at 4410. Today's session, apart from the last period (M-period), did not witness a 30-minute bar close below this level, which was interesting.
For tomorrow, I will keep it very simple by using 4410 as my short-term pivot. The sellers are targeting a downside continuation towards the poor structure from 6/12, coinciding with the Weekly Extreme Low of 4370. As I’ve mentioned in the recent Weekly Plans, for any significant change to occur in the bigger picture, the sellers would need to break and hold below the Weekly Extreme Low, with a weekly close below it being preferred. The primary objective for buyers is to end the daily one-time framing down. Breaching today's excess high has potential for a squeeze towards the unfilled gap due to the heavy selling effort today with a negative delta of 20K. The question is, can sellers break the pattern of Thursdays and Fridays favoring buyers over the past few weeks?
Going into tomorrow's session, I will observe 4410.
Break and hold above 4410 would target 4424 / 4441 / 4451
Holding below 4410 would target 4396 / 4380 / 4370
Additionally, pay attention to the following VIX levels: 13.88 and 12.50. These levels can provide confirmation of strength or weakness.
Break and hold above 4451 with VIX below 12.50 would confirm strength.
Break and hold below 4370 with VIX above 13.88 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.