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ES Daily Plan | November 3, 2023
Today’s session formed a triple distribution with two sets of single prints, and a late-day spike as the M-period period established a new daily high.
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.
During the overnight (ON) session, there was no interest in filling the poor structure from yesterday's session, serving as a bullish indication. The market hovered around the Weekly Extreme High of 4265 during the Asian trading hours, and shortly after the European market opened, buyers exploded to the upside. As emphasized in the previous plan, buyers had the opportunity to break 4265 with a VIX below 17.80, and they acted promptly to say the least. The ON session formed four sets of single prints, and basically cleared all intraday upside targets before the opening of the RTH session.
The overnight strength led the RTH session to open on a very large true gap to the upside, gapping above the significant high volume node at 4265, where the MA200 is also located. Large gaps are generally difficult to navigate, and in a situation like today when both the Weekly Extreme High of 4265 and the final upside target of 4301 are cleared, it becomes even more complex to navigate. As regular readers are aware, these type of days are not my favorite, as the market is both stretched on the weekly and daily basis, making it tricky to chase further upside which typically leads me to adopt a defensive approach. As I frequently emphasize, refraining from chasing a trade is not an automatic invitation to initiate a trade in the opposite direction. Not trading is also a position.
There were zero nuances that supported the idea of trying to stand in front of today's freight train. The ON high was quickly breached, the was no interest below the opening level despite a pretty significant move overnight. There was a brief opportunity for sellers during the initial balance as buyers struggled to hold above the final upside target of 4301, while the VIX was holding above its support level of 16.02. Both the A, and B-periods had a negative delta, so aggressive sellers made an effort. However, no downside traction was achieved. When the range extension occurred in the C-period, the VIX dropped below 16.02, serving as another signal to refrain from fading. The rest of the session essentially drifted higher with very shallow pullbacks. As a result of the market trading well above the Weekly Extreme High of 4265, coupled with the short-term value remaining at 4159, I will be taking a day off tomorrow after a solid week, allowing other traders to take the lead in the price discovery process. Stay nimble and adjust your target expectations accordingly.
Since breaking out from the 3-day balance on Tuesday, the market has witnessed a significant rally, characterized by two consecutive gaps higher, that remain unfilled. Today's gap higher is particularly notable, as it gapped above both the high volume node (HVN) at 4265 and the MA200. The weekly has returned to a balanced state after breaking the previous week’s high. Today’s session formed a triple distribution with two sets of single prints, and a late-day spike as the M-period period established a new daily high. I will use the base of the spike at 4335 as a short-term reference point to gauge whether the market intends to continue its phase of imbalance to the upside or possibly take a breather. Overall, buyers do not face significant trouble as long as value remains established above 4265, which is where weakness started the previous week.
For tomorrow, the Smashlevel (Pivot) is 4335, which represents M-period spike base. Break and hold above 4335 ,indicating continued strength, would target the prior 6-week balance low at 4350. Break and hold above 4350 would target the resistance area from 4370 to the final upside target of 4380, which represents the Weekly Extreme High from the previous week. Holding below 4335 would target fills of today’s structure towards the afternoon pullback low of 4313, as well as the final downside target of 4297, in the case of continued weakness.
Levels of Interest
Going into tomorrow's session, I will observe 4335.
Break and hold above 4335 would target 4350 / 4370 / 4380
Holding below 4335 would target 4313 / 4297
Additionally, pay attention to the following VIX levels: 16.40 and 14.92. These levels can provide confirmation of strength or weakness.
Break and hold above 4380 with VIX below 14.92 would confirm strength.
Break and hold below 4297 with VIX above 16.40 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.