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ES Daily Plan | October 23, 2023
On Friday, the market saw a continuation of the daily downside imbalance phase, characterized by another lower high and lower low.
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.
On Friday, the market saw a continuation of the daily downside imbalance phase, characterized by another lower high and lower low, following the lack of interest in trading within the prior day’s range. Friday’s Smashlevel of 4301 was sold after the initial push higher in the RTH session (HOD: 4302.25), leading to both the intraday and weekly downside targets getting hit. I posted a brief recap with reflections of Friday’s session on Substack for those curious, highlighting some interesting nuances.
Friday's session marked the third consecutive instance a new daily low was established during the M-period, which refers to the last 30 minutes of RTH. In recent sessions, there has been minimal to no trading activity within the prior day's value area, indicating the presence of initiative activity. I will use 4254 as a short-term reference to assess whether the initiative activity will persist, or if the market will find an opposite response. It's crucial to monitor whether the lower prices of the spike will either find acceptance, favoring sellers, or face rejection, which is the preferred outcome for buyers and could signify a shift in recent market dynamics. As I mentioned in the Weekly Plan published yesterday, the short-term value (5D VPOC) is located at 4402, which is 154 handles above Friday's settlement. This suggests that an immediate breakdown may not be the most favorable scenario for sellers, given the considerable deviation from value. Keeping this in mind, an immediate breakdown that fails could potentially trigger a strong counter-move. However, a market that is establishing value below the resistance area of 4275 to 4285 would be deemed weak overall.
For tomorrow, the Smashlevel (Pivot) is 4254, which represents Friday’s M-period spike base, a notable LVN in the profile. Break and hold above 4254, indicating rejection, would target the resistance area from 4275 to 4285, where the previous month’s low is located. Break and hold above 4285 would target fills towards the final upside target of 4301. Holding below 4254, indicating acceptance, would target the unfilled gap at 4239.75 and the daily NVPOC at 4225. Break and hold below 4225 would target the support area from 4200 to the final downside target of 4190.
Levels of Interest
Going into tomorrow's session, I will observe 4254.
Break and hold above 4254 would target 4275 / 4285 / 4301
Holding below 4254 would target 4239 / 4225 / 4200 / 4190
Additionally, pay attention to the following VIX levels: 23.22 and 20.18. These levels can provide confirmation of strength or weakness.
Break and hold above 4301 with VIX below 20.18 would confirm strength.
Break and hold below 4190 with VIX above 23.22 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.