ES Daily Plan | March 9, 2023
Today's session had a balanced profile, with reversals being the main theme. We are stuck in the upper distribution from 3/2 with poor structure both above and below.
Which business will be addressed first?
Contextual Analysis
Our primary focus for today's session was the “mini-balance” area, and Smashlevel 4000. The overnight (ON) session was pretty much a non-event, trading within the extremes of our area of interest. A decent reversal occurred when the 4000 level was tested during the European session. I published a tweet with a recap of that sequence.
The buying effort failed to follow through, leading to sellers entering the market and bids being pulled. A full traverse of the mini-balance was eventually completed before the opening of the regular trading hours (RTH).
The RTH session opened within the "mini-balance" area, and like the ON session, it was relatively uneventful. During the initial balance (IB), sellers tried to push the price down and probed below the previous day's low, but they were unable to gain downside momentum. During that sequence, the 3975 level was tested and played a significant role throughout the session. As you may recall, 3975 marks the beginning of the support area from the Weekly Plan, “where buying activity can be expected”. The first reversal off 3975 was good in terms of orderflow. The heavy selling pressure was absorbed and we could identify exhaustion prints on the Footprint, which was followed by aggressive buyers entering the market. See below.
The buyers attempted to break to the upside in C-period after the failed attempt by the sellers, but their attempt also failed. Rotations were a notable feature of today's session, and reversal traders were able to take advantage of them. Buyers got too crowded above 4000, resulting in a poor high, which prompted a fairly quick downside move for another test of 3975. Buyers were once again able to absorb the selling pressure at 3975, which resulted in a closing squeeze. The second test of the 3975 level actually resulted in an excess low being formed, which is not visible on this chart as it is in 4-tick increments. However, I have attached a snapshot from the 1-tick increment chart where it can be seen. Sellers want to break that low fairly quickly, which they failed to do in today’s L-period pullback.
Today's session had a balanced profile, with reversals being the main theme. The daily is one time framing down as prior day’s low was taken out. Today’s high is poor, while we have excess on the lows. The M-period had a somewhat disorganized structure due to the closing squeeze. If we get some fills of that structure overnight, buyers want to hold the 3987 level, which is the Smashlevel for tomorrow’s session. Buyers main objective is to end the daily OTFD by taking out today’s poor high, potentially leading to more short-covering. On the other hand, sellers, who have had difficulty breaking the upper distribution from 3/2, aim to break today's excess low to target fills of the poor structure from the 3/2 session, which would resolve yesterday’s imbalanced profile to the downside.
Going into tomorrow's session, I will observe 3987.
Break and hold above 3987 would target 4000 / 4025 / 4040
Holding below 3987 would target 3975 / 3955
Additionally, pay attention to the following VIX levels: 19.98 and 18.24. These levels can provide confirmation of strength or weakness.
Break and hold above 4040 with VIX below 18.24 would confirm strength.
Break and hold below 3955 with VIX above 19.98 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
The levels today are on point. You’re a beast Smash
Hi Smash,
Just wanted to point out that the VIX details are not updated in substack text, but they are in the contextual analysis image.
Thanks as always for your updates, appreciate it much!!