ES Daily Plan | June 5, 2023

The market is currently one-time framing up across all time frames following Friday's breakout, which formed a double distribution.

The immediate level of interest is Friday's afternoon pullback low in J-period.

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Contextual Analysis

Ahead of Friday's session, the buyers aimed to consolidate near the upper end of the 4-day balance area by maintaining within Thursday's upper distribution in an effort to initiate a breakout. Following Thursday’s session, which left behind very poor structure, the buyers wanted see a breakout fairly quickly. The market experienced a phase of consolidation during the Asian session, and the breakout finally materialized during the European session.

The RTH session opened with a true gap to the upside, and the market started to rally right out of the gate. The last upside target of 4265 was reached and exceeded immediately, but without the VIX confirming the strength. By the end of the A-period, the aggressive sellers succeeded in pushing the price back below 4265, leading to a drop of 15 handles. However, the buyers were quick to pick that dip up, resulting in a very short-lived weakness. Opening on a true gap to the upside, breaking out of the daily balance, one can’t get bearish unless the gap fails, and acceptance is established back within the daily balance area. The VIX eventually broke its support in E-period, giving sellers a very hard time gaining downside traction. In general, I don’t chase further upside when the last intraday target is met with a non-confirming VIX, but on Friday, the was potential to chase more aggressively as the market was breaking out of a balance area. Context always.

Friday’s session resulted in a double distribution trend day to the upside, with one set of single prints in C-period. The market is one-time framing up across all time frames, indicating that buyers are in full control of the auction. The primary objective for sellers is to put an end to the daily one-time framing up by breaking 4249. It worth noting that the short-term value (5-day VPOC) is nearly 100 handles lower than Friday’s settlement. Having that said, the buyers aim to spend time and volume within Friday’s range to migrate the short-term value higher. This would suggest that the upward auction is not yet complete. In the event of an upside continuation, the primary targets for buyers are pretty straightforward; the prior Weekly Extreme high of 4320 and the August high at 4327.50. Those targets are an interesting area to observe if responsive sellers are active, especially if the market experiences an immediate upward move without a pullback. In the short-term, the key areas to focus on are 4285 and 4275. 4285 represents Friday's afternoon pullback low, while 4275 marks the breakout single prints that separate the distributions. The most bearish outcome would be established acceptance back within the prior balance area, indicating a failed breakout.

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Going into tomorrow's session, I will observe 4285.

• Holding above 4285 would target 4300 / 4320 / 4327

• Break and hold below 4285 would target 4275 / 4255

Additionally, pay attention to the following VIX levels: 15.32 and 13.88. These levels can provide confirmation of strength or weakness.

• Break and hold above 4327 with VIX below 13.88 would confirm strength.

• Break and hold below 4255 with VIX above 15.32 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.