ES Daily Plan | May 31, 2023

Prices were explored above the previous week's high early in the session; however, the buyers failed to sustain the move.

Today's afternoon rally high is of short-term interest, perfectly aligned with Friday's high.

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Contextual Analysis

In today's overnight (ON) session, the market opened above the previous week's high and remained above it until the start of the RTH session. Despite multiple attempts during the Asian trading hours, sellers were unable to push the market back within Friday's range, resulting in an upward continuation during the European session. The upside target of 4235 was reached in the process. Note that today’s ON high of 4243 failed to get retested during today’s RTH session, making it a reference to carry forward. The prior ON session (holiday) printed a high of 4243.25. During the ON session, the VIX printed a low of 16.98 (16.94 was support outlined in the previous plan).

Following the buyers' success overnight, the RTH session opened with a true gap to the upside. However, the buyers struggled to gain traction above the opening level, which creates the possibility of an inventory correction. The sellers managed to fill the gap, which is not the most bullish outcome, but as long as acceptance is not established back within the previous day’s range, it’s not a huge trouble for the buyers. The gap-fill in B-period provided a decent bounce, but did you notice how the buyers once again failed to regain the opening level? The B-period high is one tick below the open level, making it a weak reference to carry forward. Gradually, the sellers began to traverse Friday’s upper distribution, one-time framing down for the initial nine periods. As a result, there was a test of the highlighted yellow area, which included the Smashlevel of 4205, and buyers were found after a sneaky headfake move (LOD: 4200). The test of 4205 delivered the most significant bounce of the session, as it marked the end of the intraday one-time framing down, thereby providing additional fuel. The obvious upside target for that move was the FS VWAP, which aligned perfectly with Friday’s high. Notable selling activity was observed at the FS VWAP, serving as a signal to exit potential longs.

Note the sell activity at the FS VWAP / Previous week’s high.

The weekly is back to one-time framing up mode following the break of the 3-week balance high. Remember that 4194.75 is the high of the previous month. This indicates that if buyers can achieve a closing price above it tomorrow, this month will be characterized as an "outside month up". Not much changed contextually after today’s session as the daily continues the one-time framing up. The sellers main objective is the end the daily one-time framing up, by breaching today’s low of 4200. I will observe today’s afternoon rally high in the short-term, where the selling activity was observed today. The sellers want to hold below it to target the poor structure from Friday’s session. A break and hold above 4222 targets today’s A-period excess and the ON highs from the past two sessions.

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Going into tomorrow's session, I will observe 4222.

• Break and hold above 4222 would target 4234 / 4255

• Holding below 4222 would target 4205 / 4195 / 4180

Additionally, pay attention to the following VIX levels: 18.44 and 16.48. These levels can provide confirmation of strength or weakness.

• Break and hold above 4255 with VIX below 16.48 would confirm strength.

• Break and hold below 4180 with VIX above 18.44 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.