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ES Daily Plan | May 23, 2023
Today's session was characterized by two-sided activity, with buyers working to establish value in the upper distribution of the previous week. Contextually, not much has changed after today.
The overnight (ON) session opened below Friday’s RTH low, leading to a test of the second last downside target of 4187. Pay attention to the footprint chart on the right, illustrating the initial 30 minutes of the ON session. Passive buyers successfully absorbed the aggressive selling pressure, resulting in a thin profile in the lower half, suggesting a rejection of the lower prices. Take note of the exhaustion prints observed at the low. The ON low of 4186.50 ended up being the low of the full session. The rejection of the prices below Friday’s low, led to traverse of Friday’s lower distribution before the opening of the RTH session.
The RTH session opened within Friday’s lower distribution, and similar to the ON session, the initial phase proved to be more volatile. The poor structure separating Friday’s distributions was immediately cleaned up during the A-period. However, the buyers were unable to address the unfinished business at the previous week's high, which remains unresolved and is a carry forward. During the B-period, the price action was impacted by fake news, leading to a liquidation break and a spike in the VIX. This downward move breached Friday’s low by two ticks, technically putting an end to the daily one-time framing up. However, I will continue to interpret the daily as OTFU. The buyers quickly responded and picked up this sudden drop, which effectively resolved the structural issues at Friday's low. Throughout the remainder of the session, there was responsive activity, and the market primarily stayed around the Smashlevel of 4209, which represented the most traded price by volume and time in today's session.
Ahead of today's session, the primary aim for the buyers was to establish value (acceptance) within the upper distribution of the previous week, with a focus on shifting the short-term value upwards (5-day VPOC). After today's session, the 5-day VPOC has transitioned from 4138 to 4205, representing a positive development for the buyers considering the directional move observed at the end of the previous week. Other than that, not much has changed contextually after today’s session. The market is one-time framing up across all time frames, as I don’t consider the daily to have ended it. The buyers remain in short-term control as the sellers continue to struggle gaining downside traction below the base of Thursday’s upward spike. Overall, the buyers are not facing significant trouble as long as the trading remains within the upper distribution of the previous week. The sellers aim to defend the highlighted resistance area and primarily bring an end to the daily one-time framing up, which would target the lower end of
previous week’s upper distribution.
Going into tomorrow's session, I will observe 4212.
Break and hold above 4212 would target 4222 / 4235
Holding below 4212 would target 4196 / 4187 / 4173
Additionally, pay attention to the following VIX levels: 18.12 and 16.30. These levels can provide confirmation of strength or weakness.
Break and hold above 4235 with VIX below 16.30 would confirm strength.
Break and hold below 4173 with VIX above 18.12 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.