ES Daily Plan | October 10, 2023

Today's session saw an upside continuation as buyers effectively maintained levels above the double inside day range during the overnight weakness.

ES Daily Plan | October 10, 2023

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Contextual Analysis

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.

The overnight (ON) session opened with a gap to the downside, leading to an immediate test of the final downside target of 4305. In situations like this, there's little one can do except to play defense. In times of market volatility, it's quite common to become emotionally influenced, potentially leading to poor decision-making. Sellers who emotionally chased further downside below 4305 encountered a notably difficult session. Of course, this observation is made with the benefit of hindsight. However, these plans provide you with all the intraday targets before the session starts, offering a quick understanding of where to consider interacting and, more importantly, where it's wise to exercise caution. Despite a VIX trading above its resistance of 18.38, sellers were unable to explore prices below 4305, except for a brief period during the European open.

The RTH session opened at the lower end of Friday’s main distribution. During the initial four periods, the sellers were active on bounces, with the VIX retesting its previously broken resistance level of 18.38. However, sellers couldn't replicate the overnight session's performance and only managed to partially fill the single prints from Friday's E-period. Given the limited trading activity below Friday's main distribution and the subsequent drop in the VIX below its resistance level, today's upside continuation isn't particularly surprising.

Today's session saw an upside continuation as buyers effectively maintained levels above the double inside day range during the overnight weakness. The session resulted in a double distribution, highlighted by a large set of single prints that occurred during the I-period. The primary objective for buyers was to end the weekly one-time framing down by breaching 4358.50, and they successfully achieved this. I will use the 4358.50 level as my short-term reference point for tomorrow's session. Holding above it would target the daily NVPOCs above, while dropping below it would target fills of today's poor structure towards the lower distribution. Overall, the buyers are not facing significant trouble as long as value is established above the previous week’s value area.

For tomorrow, the Smashlevel (Pivot) is 4358, which represents the high of the previous week. Holding above 4358 would target the resistance area from 4380 to 4390, which represents the 10D balance high and the NVPOC from 9/22. Break and hold above 4390 would target the resistance area from 4405 to the final upside target of 4415. Break and hold below 4358 would target fills of today’s poor structure towards the upper end of today’s lower distribution at 4346. Break and hold below 4346 would target the final downside target of 4326, which represents the medium-term value (20D VPOC).

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Going into tomorrow's session, I will observe 4358.

• Holding above 4358 would target 4380 / 4390 / 4405 / 4415

• Break and hold below 4358 would target 4346 / 4326

Additionally, pay attention to the following VIX levels: 18.64 and 16.76. These levels can provide confirmation of strength or weakness.

• Break and hold above 4415 with VIX below 16.76 would confirm strength.

• Break and hold below 4326 with VIX above 18.64 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.