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ES Daily Plan | October 11, 2023
I will use 4403 as a short-term reference to gauge the market's strength or weakness. Tomorrow, PPI data, followed by FOMC minutes.
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 was relatively quiet, as trading occurred primarily at the upper end of yesterday's upper distribution, with some price discovery extending beyond the previous day's high. The uneventful nature of the overnight session carried bullish implications, as it highlighted the lack of interest in filling the poor structure that emerged following the breakout from the double inside day range.
The RTH session opened at the upper end of yesterday’s upper distribution. Initially, aggressive sellers made an attempt below the previous day's high. However, the lack of downside traction for the sellers continued, as passive buyers were able to absorb this selling pressure. I’ve added the footprint of the A-period on the chart for reference. The B-period exploded to the upside after having zero interest in any fills of the A-period. The market was one-time framing up intraday, and when the D-period opened around 4400, the VIX breached its support level of 16.76. This increased the odds of the final upside target of 4415 getting hit, while also sending a cautionary signal about counter-trend trades. The 4415 level was reached in E-period, with VIX confirming strength, which generally has potential for further upside. However, at that point the session had established a triple distribution following two consecutive trend days, creating a challenging contextual situation for anticipating additional upside. A poor high formed a couple of handles above 4415, resulting in a liquidation break in H-period that filled the D-period single prints, and partially filled those from the B-period.
After breaking out from the double inside day range, the market has witnessed a substantial rally. The daily is one-time framing up, and the primary objective for sellers is to end that pattern by breaching a previous day's low. I’ve added the 5D volume profile on the chart, and it’s worth noting that the short-term value (5D VPOC) is at 4275, which is currently 115 handles (!) below today's closing price. With that in mind, buyers primary objective is to shift it higher by spending time and volume, ideally above the previous week’s high (4358.50). I will use 4403 as a short-term reference to gauge the market's strength or weakness. From H-period onwards, the session had a negative delta of 14K, making the immediate resistance area from 4403 to 4413 important for sellers to defend to prevent an upside continuation. Tomorrow, PPI data, followed by FOMC minutes.
For tomorrow, the Smashlevel (Pivot) is 4403, which represents PM resistance. Break and hold above 4403 would target 4413, the level from which today's liquidation break initiated. Break and hold above 4413 would target an upside continuation towards the final upside target of 4435. Holding below 4403 would target the lower end of today’s main distribution at 4389. Break and hold below 4389 would target fills towards today’s opening price at 4376, coinciding with the Weekly VWAP. In the case of continued weakness, the target is the previous week’s high at 4358.50, as well as the final downside target of 4346.
Going into tomorrow's session, I will observe 4403.
Holding above 4403 would target 4413 / 4435
Break and hold below 4403 would target 4389 / 4376 / 4358 / 4346
Additionally, pay attention to the following VIX levels: 17.96 and 16.14. These levels can provide confirmation of strength or weakness.
Break and hold above 4435 with VIX below 16.14 would confirm strength.
Break and hold below 4346 with VIX above 17.96 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.