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ES Daily Plan | June 8, 2023
The market remains in a state of balance, awaiting further market-generated information.
Today’s session formed a b-shape profile and left a rather ugly low in terms of structure. Will sellers take it out?
There is no need for an extensive analysis of today's session given its uneventful nature. During the overnight (ON) session, there was some price exploration above the prior day's high, but the majority of the session remained within prior range.
The RTH session opened above the previous value area, and aggressive buyers immediately tested the upper end of the multi-day balance area, which as always is considered resistance until proven otherwise. Conversely, the lower end is viewed as support. Despite significant effort, the buyers were unable to push the price higher, resulting in a reversal as the market buyers lacked sufficient size to overcome the presence of passive limit orders (absorption). This sequence served as a great example of what should be avoided during short-term balance; buying resistance (or selling support). If you are seeking fade setups, this is exactly what you want to see from an order flow perspective; absorption of poorly located longs followed by aggressive sell activity.
The daily is now in a 4-day balance. As long as the market remains within this balance range, the expectation is to observe two-sided activity, highlighting the importance of staying nimble. It’s worth noting that today’s high fell short of cleaning up Monday’s poor high, making the balance high even weaker. Today’s session formed a b-shape profile, leaving a fairly ugly low in terms of structure. 4270 will be of my interest in the short-term, note the monthly VWAP in close connection. The inability to take it out would tell us a lot about the state of the sellers, and would target a potential return to the balance highs. The level of 4285 remains noteworthy. A successful break of 4270 would target the lower end of the balance area to complete a full traverse following today’s rejection of the balance highs. In the event of further weakness, there is an unfilled gap at 4239.75. Overall, the buyers are not facing significant trouble as long as acceptance is not established back within the prior 4-day balance, indicating a failed breakout.
Going into tomorrow's session, I will observe 4270.
Holding above 4270 would target 4285 / 4303
Break and hold below 4270 would target 4255 / 4240
Additionally, pay attention to the following VIX levels: 14.72 and 13.16. These levels can provide confirmation of strength or weakness.
Break and hold above 4303 with VIX below 13.16 would confirm strength.
Break and hold below 4240 with VIX above 14.72 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.