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ES Daily Plan | May 22, 2023
Friday’s session resulted in an double distribution to the downside, as the single prints from the liquidation break in D-period remained unfilled.
My focus will be on the upper end of the lower distribution.
During Friday's overnight session, the market immediately breached Thursday's high, with limited trading activity observed within the highlighted spike area. The ON session, reached a high of 4227.25 (Poor), which is an important reference going forward, given that Friday's RTH session was unable to retest it. The overnight inventory was 100% net long going into the RTH session, indicating that all trades took place above the settlement price from the previous day.
The RTH session opened with a true gap to the upside, which failed to fill during the opening pullback, which generally is a bullish outcome. However, despite this, the buyers were unable to breach the ON high during the first three periods, forming a poor high. This poor high, along with the poor high from the ON session, indicated a possible exhaustion among buyers following the directional move witnessed on Wednesday and Thursday. The lack of upward follow-through in a generally bullish environment resulted in a liquidation break, causing the long inventory to be stopped out. It’s worth noting that the weekly gap at 4220.75 was filled during the initial balance, so that is now out of the way. The rest of the session was basically filling the low volume area located within Thursday’s spike area. However, the sellers failed to gain any meaningful traction below the base of the spike.
Friday’s session resulted in an double distribution to the downside, as the single prints from the liquidation break in D-period remained unfilled. In the short term, my focus will be on the upper end of the lower distribution at 4209, which also represents the high of the prior 4-month balance area. The market is one-time framing up across all time frames. Sellers main objective is to put an end to the daily one time framing up by breaching Friday's low of 4191.50 (Poor). I have included the volume profile from the previous week, displaying two significant distributions. Note that the weekly VPOC is located in the lower distribution. The buyers main objective is to build value (acceptance) within the upper distribution to primarily migrate the short-term value up (5-day VPOC). The sellers aim to negate this imbalance, with the intention of returning to the current value. There is unfinished business at Friday’s high, suggesting that the upward auction is probably not finished due to the lack of excess. If there is an immediate pullback before cleaning up the highs, my primary focus remains on observing whether any buying activity will emerge. On the other hand, if there is an immediate clearance of the highs but a failure to hold above the previous week's range, it may attract selling activity. Overall, buyers are not facing significant trouble as long as the trading remains within the upper distribution of the previous week.
Going into tomorrow's session, I will observe 4209.
Break and hold above 4209 would target 4222 / 4235
Holding below 4209 would target 4196 / 4187 / 4173
Additionally, pay attention to the following VIX levels: 17.70 and 15.92. These levels can provide confirmation of strength or weakness.
Break and hold above 4235 with VIX below 15.92 would confirm strength.
Break and hold below 4173 with VIX above 17.70 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.