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ES Daily Plan | March 1, 2023
The market remains in a state of consolidation. The longer a consolidation lasts, the more significant the move out of it tends to be.
The primary goal of buyers is to protect the monthly one time framing up.
I'll keep it brief as today's session was relatively quiet. The overnight (ON) session was trading in a very slow upward trend during the early stages of the Asian session. When the market reached the Smashlevel of 3995, it encountered selling pressure. After the market was rejected at 3995, the price action weakened considerably, and at the start of the European session, we observed the price exploring below the previous day's range. We got a test of yesterday’s Smashlevel of 3974, and the selling activity shut off and formed a poor low, which resulted in short-covering away from that area. Trading has been challenging in the past few sessions due to emotional trading without any significant follow-through in either direction. This makes it difficult for traders who have unrealistic target expectations. It's important not to be greedy and to book profits and reassess the situation. Sellers got too short at the opening of the European session, leading to a significant reversal of 30 handles. Then it was buyers turn to get too long, which resulted in long liquidation before the opening of RTH.
During the RTH session, there were opportunities for both buyers and sellers, and reversals were a prevalent theme. This is typical when the market is in a state of balance. During the initial balance, sellers were unable to clear the poor ON low, despite coming very close to doing so. This allowed for upward reversals. The market encountered resistance at the Smashlevel of 3995 for multiple periods, until it was finally breached during G-period, resulting in single prints forming. When the market is in balance, it tends to resolve poor structure, unlike during breakouts where poor structure can remain unresolved for extended periods. The single prints were eventually filled when buyers formed another poor high and failed to clean up the poor ON high. This led to long liquidation, which was not unexpected. The ON low was cleaned up into the closing session.
The market remains in a state of consolidation, trading in a 4-day balance. As the month of February has ended, Friday's low now marks the low of the month. The primary goal of buyers is to protect the monthly one time framing up, whereas sellers aim to take it out to bring monthly back to balance (3947.50). A bigger directional move will occur when we auction outside the daily balance area. Short-term, I’m keeping an eye on today’s initial balance low, which also is the value area low from the previous week.
Going into tomorrow's session, I will observe 3975.
Holding above 3975 would target 3995 / 4005 / 4025
Break and hold below 3975 would target 3955 / 3940 / 3925
Additionally, pay attention to the following VIX levels: 21.75 and 19.65. These levels can provide confirmation of strength or weakness.
Break and hold above 4025 with VIX below 19.65 would confirm strength.
Break and hold below 3925 with VIX above 21.75 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. Twitter: @smashelito | FAQ: smashelito.com