ES Daily Plan | November 29, 2023
I will continue to interpret the daily as balance, considering the break of both yesterday’s high and low, yet closing within range. All levels remain unchanged.
Visual Representation
For new followers, the yellow levels highlighted at the bottom are the primary levels that I focus on intraday. My strategy for preventing impulsive decisions at unfavorable locations involves following a simple yet effective rule of exercising caution when initiating trades outside of the yellow levels. This implies that I am cautious chasing longs above the final yellow upside target and shorts below the final yellow downside target. It is crucial to understand that refraining from chasing a trade is not an automatic invitation to initiate a trade in the opposite direction.
Contextual Analysis
In both the overnight (ON) and regular trading hours (RTH) sessions, sellers attempted to break below the 4554 level on multiple occasions but were unsuccessful in gaining meaningful downside traction. As a result, solid reversal setups materialized, especially in the RTH session.
The RTH session immediately filled the daily gap #5 at 4554.75, but the desired downside continuation sellers wanted to see did not come to fruition, despite decent selling efforts during the initial balance (first hour of RTH). The aggressive sellers were unable to push through the passive limit orders below 4554, resulting in a noticeable squeeze, with the C-period exploding above the very narrow initial balance range. I will provide a visual representation of this sequence on Substack, specifically focusing on the order flow perspective.
At one point, the squeeze formed a triple distribution profile, leading to a test of the Smashlevel of 4572 and Wednesday’s highlighted excess high. The price exploration above 4572 was short-lived, trapping late buyers within the excess area when responsive sellers entered the market aggressively. I will also share a visual of this sequence on Substack.
The rejection above 4572 led to a liquidation break, effectively filling all intraday single prints, and the session closed back within yesterday’s range, following a notably calm PM session.
Currently, the market is in a short-term state of balance, coiling for a directional move while awaiting additional market-generated information. This follows sellers' inability to gain meaningful downside traction below 4554, and buyers getting rejected from Wednesday’s highlighted excess high. I will continue to interpret the daily as balance, considering the break of both yesterday’s high and low, yet closing within range. All levels remain unchanged. I will continue to monitor 4572 and 4554 to see whether a break can trigger a stronger directional move, or if we continue to find an opposite response. As always, when the market lacks a clear directional conviction, it’s crucial to not overstay your welcome in any trade.
For tomorrow, the Smashlevel (Pivot) is 4572, which represents the value area high (VAH) of the previous week. Break and hold above 4572 indicating a continuation of the weekly imbalance phase, would target the unfilled daily gap at 4591, effectively negating Wednesday’s excess, as well as the final upside target of 4604, representing a weekly NVPOC. Holding below 4572 would target support area from 4554 to 4544, as well as the final downside target of 4530, in the case of continued weakness. Take note of the high volume node (HVN) within the 4530/4520 support area.
Levels of Interest
Going into tomorrow's session, I will observe 4572.
Break and hold above 4572 would target 4591 / 4604
Holding below 4572 would target 4554 / 4544 / 4530
Additionally, pay attention to the following VIX levels: 13.26 and 12.10. These levels can provide confirmation of strength or weakness.
Break and hold above 4604 with VIX below 12.10 would confirm strength.
Break and hold below 4530 with VIX above 13.26 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.
Weekly Plan
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.
It is worth noting that the short covering from trapped shorts was triggered by Waller's (voter through 2025 and a hawk, notably) comments hinting about a rate cut, the first mention I've heard this cycle.
Fantastic post!