ES Daily Plan | March 27, 2023
Responsive activity was triggered on Friday due to the absence of further downside follow-through.
Buyers main objective is to put an end to the daily one time framing down by breaching Friday's high of 4003.50.
Contextual Analysis
The Asian hours of Friday's overnight (ON) session were relatively quiet, but the pace picked up during the European session following buyers failure to hold above Friday’s Smashlevel of 3990. The rejection off 3990 led to a ~50 handle sell-off, breaching Thursday’s RTH low in the process. The VIX breached the resistance of 23.98, confirming the weakness and provided some good short setups prior to the opening of regular trading hours (RTH).
The ON session concluded with an impulsive move to the upside, which adjusted inventory. However, as soon as the RTH session opened, sellers brought the market back down again. The key observation from the initial balance was that the sellers were unable to break below the ON low, which was crucial for any potential downside continuation towards the last downside target of 3920. In the first four trading periods (A to D), the VIX fluctuated in and out of the resistance level, making it quite challenging to navigate.
It was emphasized in the Friday's recap that the D-period had a significant impact on the session. Aggressive sellers made a significant effort (with a negative delta of 6681 at one point) to challenge the excess from the A-period, to get that downside continuation. However, passive buyers were able to absorb that effort, leading to a significant reversal. Further confirmation of the failure of the selling pressure was provided when the VIX came back below 23.98 in a decisive manner during E-period. The market conditions, which included excess holding and the VIX retreating from resistance, coupled with the inability to break below the ON low, made it challenging to force it on the short side. The market was one-time framing up intraday for the rest of the session, reaching the spike base of 3/22, which continues to be a level of interest the upcoming week. For new followers, I would like to emphasize that while the correlation between the ES and VIX levels is a very useful tool for measuring market strength and weakness, it should be utilized in conjunction with your own strategies and not relied upon solely. TradingView has no real-time data for “CBOE:VIX”, but you can use the ticker “TVC:VIX” instead. That data is provided by TradingView, it's free and updates in real-time.
The daily remains in one-time framing down mode, making lower highs and lower lows. Buyers main objective is to put an end to that by breaching Friday’s high of 4003.50, which have potential for further short-covering. Sellers remain in short-term control as long as the daily OTFD remains intact. Although there was a lot of weakness observed last week, the inability of sellers to clean up the poor structure from 3/16 is noteworthy. In the short-term, the 3990 level will continue to be of interest, and attention will also be on the 4005 level.
Going into tomorrow's session, I will observe 3990.
Holding above 3990 would target 4005 / 4030 / 4048
Break and hold below 3990 would target 3970 / 3952
Additionally, pay attention to the following VIX levels: 23.04 and 20.40. These levels can provide confirmation of strength or weakness.
Break and hold above 4048 with VIX below 20.40 would confirm strength.
Break and hold below 3952 with VIX above 23.04 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
Am I wrong about the definition of OTFU/D?
I thought it was an OTFD Ends if it closed above the previous day's profile low. I would like to know the exact definition.