ES Daily Plan | November 8, 2023
The daily phase of upside imbalance persists with a double distribution forming today, as sellers failed to fill the B-period single prints.
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
The overnight session was largely uneventful, as trading remained confined within the range of the previous day. Sellers attempted to attack yesterday’s poor low during the European session but they continue to face difficulty in gaining downside traction, as this pullback was easily picked up by buyers who managed to traverse yesterday’s value.
The RTH session saw an immediate pullback with a negative delta of 6K, which passive buyers were also able to absorb, resulting in a reversal. The pivot for the session was 4386, and it was breached during the B-period, leading to a break of yesterday’s inside day to the upside and forming single prints. The breakout quickly reached the resistance area from 4400 to 4410, where the upside momentum stalled. Passive sellers consistently reloaded within this resistance area throughout the entire session. The most favorable trade setup occurred in the G-period as the 4386 level was revisited, leaning against the FS VWAP and the B-period single prints, which sellers failed to fill. I will provide a visual of this sequence on Substack for reference.
The daily phase of upside imbalance persists with a double distribution forming today, as sellers failed to fill the B-period single prints, although its pace has notably slowed down upon reaching an area of prior balance. The current conditions area quite tricky at the moment, with sellers struggling to gain any meaningful downside traction while the daily one-time framing up remains intact. At the same time, the market is trading at the upper end of the weekly balance area, making it an unfavorable location to initiative new long positions. Exercise caution not to overstay your welcome in any trades, as the market awaits further market-generated information. Tomorrow, Powell will be speaking, which should move the tape around.
The primary objective for both buyers and sellers remains the same. Buyers are aiming to end the monthly one-time framing down by breaching the October high at 4423.25, while sellers aim to break the pattern of higher lows on the daily in order to potentially trigger some weakness.
For tomorrow, the Smashlevel (Pivot) is 4386, which represents today’s afternoon pullback low, coinciding with the weekly VWAP. Holding above 4386 would target an upside continuation towards 4410, as well as 4418 and 4423, which represents the Monthly Extreme high and October high. In the case of continued strength, the final upside targets is located at 4435. Break and hold below 4386 would target the support area from 4373 to the final downside target of 4363, effectively ending the daily OTFU.
Levels of Interest
Going into tomorrow's session, I will observe 4386.
Holding above 4386 would target 4410 / 4418 / 4423 / 4435
Break and hold below 4386 would target 4373 / 4363
Additionally, pay attention to the following VIX levels: 15.46 and 14.14. These levels can provide confirmation of strength or weakness.
Break and hold above 4435 with VIX below 14.14 would confirm strength.
Break and hold below 4363 with VIX above 15.46 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.
Thanks, my friend! It's been a fantastic day with an ended up positive (longs). Despite a significant amount of Federal Reserve communication, the markets remained resilient and didn't decline as anticipated. Levels were perfect!
Hi and thanks for continuing to provide indispensable analysis. What does the FS stand for in FS VWAP?