ES Daily Plan | March 30, 2023
Today's session was quite challenging due to the sizable gap and the immediate achievement of our last upside target.
A shift occurred when the level of 4048 was breached, making it crucial for buyers to maintain.
Contextual Analysis
In the recent days, the European session has demonstrated higher volatility, however, today, there was a shift, as the Asian session showed a greater level of volatility instead. The overnight (ON) session opened 1 handle above the Smashlevel of 4005, and never looked back. While the Asian session was characterized by notably poor structure, the Euro managed to establish a distribution. Almost all upside targets (4020/4030/4048) were reached before the opening of the regular trading hours, with the ON session achieving a high of 4045.50.
Similar to the session on Monday, the RTH session opened with a large true gap to the upside, meaning the market opened completely outside of prior day’s range. As we discussed in Tuesday's daily plan, reviewing Monday's session, if there is an early inability to break and sustain a move above the ON high, it can create opportunities to fade the market, targeting an inventory correction. What made this particular fade setup intriguing for today's session was that the ON high was 4045.50, while the last upside target was 4048. Additionally, the VIX did not confirming the strength, as it remained above the support level of 18.80. The buyers only briefly explored prices above the ON high, with a high of 4047.75. Subsequently, we observed a 15-handle reversal, with pretty noticeable aggressive sell activity. The fade setup was short-lived, since sellers were unable to break the distribution formed during the European session, and another poor low was formed in C/D-Period. I published a tweet with a visual of the pretty significant selling effort during that drop, but no further downside traction for sellers. The second attempt to break 4048 was in H-period, which resulted in another rejection.
Today's session was quite challenging due to the sizable gap and the immediate achievement of the last target of 4048, coupled with the VIX's lack of confirmation of the market's strength. There was little appeal to pursue further upside, yet no signals emerged to encourage selling. Given the poor low and the weak J-period low against the initial balance (IB) low, it was evident that sellers lacked the necessary strength for any stronger correction. The change took place in K-period, when the buyers were finally able to break above the 4048 level, triggering another squeeze.
Yesterday, I shared a tweet showcasing composite profiles, and today's session closed above the value area.
The core concept is that buyers aim to establish acceptance outside of the value area for a directional move, targeting an area of prior balance. In contrast, sellers aim to return to the value area to potentially trigger a traverse. The primary target for buyers tomorrow is the unfilled gap at 4097.25, while the primary target for sellers is the unfilled gap at 4009.50. Note the weekly balance high at 4082.50.
Going into tomorrow's session, I will observe 4048.
Holding above 4048 would target 4069 / 4082 / 4097
Break and hold below 4048 would target 4030 / 4020 / 4009
Additionally, pay attention to the following VIX levels: 20.12 and 18.12. These levels can provide confirmation of strength or weakness.
Break and hold above 4097 with VIX below 18.12 would confirm strength.
Break and hold below 4009 with VIX above 20.12 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
when the ON session's inventory correction fails, such as today, does that mean the overnight position is accurate?
Thank you Smash for all your help. I just want to confirm when you say holding above or hold below, does that mean couple of bars closing above or couple of bars closing below. But what time frame?
Please advise.