ES Daily Plan | October 19, 2023
Today’s session resulted in a directional move away from established value, featuring a downward spike in the M-period, with a spike base at 4343.
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 weakness that developed after yesterday’s look above 4419 and fail continued into the overnight session, as sellers once again managed to traverse the multi-day composite value area, testing 4377.
Ahead of today’s session, the main question was whether the market could trigger a stronger directional move away from this multi-day composite value area, or if we will continue to witness responsive activity. Responsive activity was observed during the initial balance (first hour of RTH). However, sellers decisively broke the 4377 level during the C-period, accompanied by a negative delta of 6K and VIX breaching its resistance level of 18.82. The sellers proceeded to defend the 4377 level for a few hours, and it was particularly interesting how the VIX simultaneously refused to drop back below 18.82, trapping late buyers who chased every bounce. A more safer approach for buyers would involve waiting for the market to reestablish acceptance above 4377 and the VIX to dip below 18.82, potentially prompting an upside traverse. The final downside target was achieved during the G-period, providing a couple of bounces. However, the sellers reloaded, ultimately leading to a downside continuation towards the end of the session.
Today’s session resulted in a directional move away from established value, featuring a downward spike in the M-period, with a spike base at 4343. When there's an imbalance between value and price at the end of a session, it's crucial to monitor whether the lower prices of the spike will find acceptance – a favorable outcome for sellers, or rejection – the preferred outcome for buyers. The immediate area of interest is the 4343-4350 area, representing the spike base and the weekly level of interest, respectively. Note how this area coincides with Monthly VWAP. In the case of acceptance, sellers are aiming for a downside continuation targeting fills of the poor structure from the 10/6 session. Conversely, buyers aim to negate today’s directional move by regaining the 4343-4350 and targeting the resistance area from 4367 to 4377, representing the lower end of the multi-day composite value area.
For tomorrow, the Smashlevel (Pivot) is 4343/4350, which represents today’s spike base and the weekly level of interest. Break and hold above 4350, indicating rejection, would target the resistance area from 4367 to 4377, which represents the 7D composite value area low (VAL). The final upside target is located at 4389, in the case of continued strength. Holding below 4343, indicating acceptance, would target a downside continuation towards 4326, as well as the final downside target of 4305. There is plenty of poor structure from 10/6 to clean up, in the case of continued weakness.
Levels of Interest
Going into tomorrow's session, I will observe 4343/4350.
Break and hold above 4350 would target 4367 / 4377 / 4389
Holding below 4343 would target 4326 / 4305
Additionally, pay attention to the following VIX levels: 20.28 and 18.16. These levels can provide confirmation of strength or weakness.
Break and hold above 4389 with VIX below 18.16 would confirm strength.
Break and hold below 4305 with VIX above 20.28 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.