ES Daily Plan | March 15, 2023

The market experienced the usual volatility today following the release of the CPI data. Going into tomorrow's session, I will observe 3938, which was the CPI high from the ON session.

Can buyers follow through?

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Contextual Analysis

Before the release of the CPI data, the ON session was largely uneventful. The lower end of the range was capped by 3890 while the upper end was capped by the Smashlevel of 3920, preventing any significant movement in either direction. However, the market witnessed its typical volatility after the CPI data release, resulting in a range of 3940-3885.

The RTH session opened on a true gap up, meaning completely outside of prior day’s range. Although the gap was filled promptly, the sellers did not manage to achieve anything beyond that. The last upside target of 3950 was reached in A-period and we were one time framing up intraday, taking out the ON high and the IB high in the process. Before the RTH session opened, the VIX had already confirmed the market's strength by breaching 24.80, which turned out to be a significant level later in the session. During the initial strength, the buyers were able to clean up a large part of the poor structure from the 3/9 session, and note how yesterday’s imbalanced profile to upside was resolved. The first sign of buyers getting exhausted occurred when the poor/weak high was formed in D/E-period, where buyers got trapped, as illustrated on the Footprint chart to the right. Counter-trend traders could have taken advantage of this situation as it presented a good opportunity for a fade setup, with the RTH/FS VWAP as a potential target. This area typically sees the afternoon pullback low, which we failed to see today. F and G-period made multiple attempts to bounce, but H-period ultimately experienced a sharp breakdown fueled by some news events. The Smashlevel of 3920 was reached during that sequence and this test lined up nearly perfectly with a retest of that VIX level of 24.80, providing a ~20 handle bounce. It’s always interesting when levels align like that, but confirmation of orderflow is always needed. Were you able to observe how the buyers started aggressively lifting the offer during that sequence? It was pretty wild. The market continued to establish lower lows while the cumulative delta formed higher lows, leading to a significant closing squeeze following sellers’ failure to hold below 3920.

ES making lower lows, CVD making higher lows.

The daily is back to one time framing up mode following the break of the 2 day balance area. We carry forward today‘s high as poor, but also weak due to the exactness of the low from the 3/8 session. Sellers main objective was to establish value below the “mini-balance”, and if unable to do so, the risk was that we get responsive activity targeting previous week’s VPOC of 3989. This remains as an upside target if buyers can follow-through. I’m observing 3938, which basically is the high of the “mini-balance” and the CPI high from the ON session. I’m keeping it very simple, the buyers remain in short-term control above, while sellers want back within the prior 2 day balance.

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Going into tomorrow's session, I will observe 3938.

• Break and hold above 3938 would target 3960 / 3970 / 3995

• Holding below 3938 would target 3920 / 3890

Additionally, pay attention to the following VIX levels: 25.20 and 22.26. These levels can provide confirmation of strength or weakness.

• Break and hold above 3995 with VIX below 22.26 would confirm strength.

• Break and hold below 3890 with VIX above 25.20 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.

ES Weekly Plan | March 13-17, 2023

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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. Twitter: @smashelito | FAQ: smashelito.com