ES Daily Plan | October 25, 2023

The daily has returned to a 3-day balance following the break of the previous day’s high, indicating that the market has transitioned from imbalance to a state of balance.

Visual Representation

ES Daily Plan | October 25, 2023

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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.

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Contextual Analysis

In the overnight (ON) session, trading remained uneventful, with the market staying within the established value area from the previous session. Buyers were able to regain control of the 4254 level after seller's failed attempts to explore prices below the previous week's low.

The RTH session opened near the medium-term value (20D VPOC) of 4265, and the initial price action was quite choppy. Buyers attempted a range extension to the upside in the C-period, effectively cleaning up yesterday’s poor high and reaching the final upside target of 4285 (4283.50). Contextually, chasing longs near 4285 was not optimal due to the lack of confirmation of strength from the VIX, which remained above its support level of 18.94. When observing the order flow, it was interesting to see the heavy aggressive buying activity being absorbed by passive sellers just below 4285. Buying effort failing to gain traction is exactly the signal you seek when looking for a potential reversal setup. I will provide a visual of this sequence on Substack, highlighting the aggressive buyers initiating at poor location, ultimately resulting in a solid reversal. Similar to the overnight session, during the G-period, the attempts by sellers to explore prices below the previous week's low were quickly rejected, leading to a return to the initial balance range.

Aggressive buyers approaching 4285 getting trapped and smashed.

The daily has returned to a 3-day balance following the break of the previous day’s high, indicating that the market has transitioned from imbalance (initiative activity) to a state of balance (responsive activity) and is now waiting for more market-generated information. Both the short-term value (5D VPOC) and the medium-term value (20D VPOC) are situated within this 3-day balance area (4265), confirming the balance. I will keep it straightforward by observing the 3D composite value area in the short-term. Buyers aim to establish acceptance above the resistance area from 4275-4285, where selling activity remains. On the flip side, sellers are aiming to establish acceptance below 4254, primarily targeting yesterday's excess low. It's essentially a battle between returning within the previous month's range or establishing acceptance below the previous week's low.

For tomorrow, the Smashlevel (Pivot) is 4275/4285, which represents the immediate resistance area. Break and hold above 4285 would target the upper end of the 3-day balance at 4301. Break and hold above 4301 would target an upside continuation towards the resistance area from 4316 to 4326, effectively cleaning up the highlighted poor structure above. Holding below 4275, indicating sellers in control, would target a traverse of the 3D composite value area towards 4254. Break and hold below 4254 would target the support area from 4230 to the final downside target of 4220.

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Levels of Interest

Going into tomorrow's session, I will observe 4275/4285.

• Break and hold above 4275/4285 would target 4301 / 4316 / 4326

• Holding below 4275/4285 would target 4254 / 4230 / 4220

Additionally, pay attention to the following VIX levels: 20.34 and 17.60. These levels can provide confirmation of strength or weakness.

• Break and hold above 4326 with VIX below 17.60 would confirm strength.

• Break and hold below 4220 with VIX above 20.34 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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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.

ES Weekly Plan | October 23-27, 2023

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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.