ES Daily Plan | May 10, 2023

Following another uneventful session, the market remains balanced across all time frames, awaiting further market-generated information. Tomorrow, we have CPI, which should bring some volatility.

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Contextual Analysis

Given the uneventful nature of both today's overnight session (ON) and regular trading hours (RTH), there isn't much additional context to provide. The ON session failed to revisit the Smashlevel of 4156, leading to some weakness during the European session. The weakness resulted in a breach of the prior day's low, which was carried forward as weak. The market formed a double distribution overnight with breakdown single prints at 4142.75.

The RTH session opened with a very small true gap to the downside, which was filled promptly in the A-period. The opening dip provided a setup identical to yesterday's, with a look below the ONL and fail. When the market opens with a true gap to the downside, this particular setup becomes even more interesting because it often triggers an inventory correction. During this sequence, the VIX printed a high of 17.86, which turned out to be the high of the day. The resistance level for the VIX, provided in the previous plan, was 17.90. The initial balance (first hour of RTH) cleaned up the poor structure from the ON session to the tick, with an IB high of 4142.75. The remainder of the session was very tricky as sellers were not able to gain downside traction following the break of yesterday’s inside day, while buyers struggled with regaining acceptance above 4141.

Aggressive buyers trapped in the PM session, resulting in a decent flush.

The range observed during today's trading session was the smallest seen in quite some time, coming in at only 14.25 handles. The market remains balanced across all time frames and is currently awaiting further market generated information. Remember that the longer a consolidation lasts, the more significant the move out of it tends to be. The CPI data is scheduled for release tomorrow, and as usual, it is expected to bring volatility in the market. There is an unfilled daily gap above at 4182.25 and one below at 4098.25, which could serve as potential target areas. The buyers aim for a daily close above 4170, while the sellers seek a daily close below 4098. Note that I have merged the last three session into a composite profile. As always, exercise patience, discipline and above all, risk management. That is how we survive in this business.

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Going into tomorrow's session, I will observe 4141.

• Break and hold above 4141 would target 4156 / 4170

• Holding below 4141 would target 4125 / 4115 / 4098

Additionally, pay attention to the following VIX levels: 18.64 and 16.78. These levels can provide confirmation of strength or weakness.

• Break and hold above 4170 with VIX below 16.78 would confirm strength.

• Break and hold below 4098 with VIX above 18.64 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.

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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.