ES Daily Plan | May 19, 2023

Today’s session resulted in an upside continuation, closing with an upward spike. The spike base is situated at 4199. The more aggressive level to observe is the prior 4-month balance high of 4208.

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Contextual Analysis

Prior to today's session, the main question was whether buyers would be able to sustain their upward move after yesterday's double distribution trend day that deviated from the recent value. The conditions were fairly straightforward, the sellers wanted to regain acceptance back within yesterday’s lower distribution, while the most bullish outcome would be to sustain trading within the upper distribution. “Lack of interest of fills is a bullish indication”, as discussed. The overnight (ON) session saw price exploration above prior day’s poor high, but this move was rejected, resulting in a test of the Smashlevel of 4163. The test of the 4163 level was executed flawlessly. The market cleaned up the poor low from yesterday’s upper distribution, triggered the stops, and a quick reversal followed. The ON low of 4161.25 was the low of today’s full session. The trapped sellers within yesterday’s poor structure provided responsive buying.

The Smashlevel of 4163 held, resulting in all upside target being met.

The RTH session opened at the lower end of the ON session, and as we can observe, there was very little activity below the open level. This was obviously in favor of the buyers since there was no interest in negating yesterday’s directional upward move. The B-period exploded to the upside, and the negative delta from A-period provided fuel. During the AM session, the market reached two upside targets of 4182 and 4194, which means that we filled the daily gap to the upside. The weekly gap of 4220.75 remains unfilled. During the PM session, the market experienced quite a few liquidation breaks. When it comes to liquidation breaks in uptrend, they tend to get filled, making it challenging to chase them. Both F-G period, and I-J-period had established poor lows, leading to subsequent reversals. This outcome ultimately punished late sellers who, for some reason, anticipated a market collapse. In the past weeks, I have repeatedly emphasized the significance of being prepared to adapt when the market transitions from a state of balance to imbalance. The market is currently breaking out of a substantial consolidation area, indicating that many traders are on the wrong side of the market. It is advised not to counter this move unless there is a definite failure observed. A clear failure for tomorrow would be if sellers end the daily one-time framing up and close below 4173. The last upside target of 4208 was reached in M-period.

Today’s session resulted in an upside continuation, closing with an upward spike, with a spike base at 4199. The more aggressive level to observe is the prior 4-month balance high of 4208. Trading within and above the spike (Acceptance) is a more favorable outcome for buyers, while trading below the spike (Rejection) is a more favorable outcome for sellers. All time frames are one-time framing up. The short and medium-term value remains at 4138. Note that we are approaching 4235.

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Going into tomorrow's session, I will observe 4199.

• Holding above 4199 would target 4220 / 4235 / 4255

• Break and hold below 4199 would target 4187 / 4173

Additionally, pay attention to the following VIX levels: 16.86 and 15.24. These levels can provide confirmation of strength or weakness.

• Break and hold above 4255 with VIX below 15.24 would confirm strength.

• Break and hold below 4173 with VIX above 16.86 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.