ES Daily Plan | October 26, 2023
The sellers remain in control as the market is one-time framing down across all time frames.
Visual Representation
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.
Contextual Analysis
Yesterday, the market tested the important resistance area 4275/4285 already after hours, and this test was quickly rejected. The subsequent overnight session came up short in retesting this area, as it reached an ON high of 4273.50, resulting in weakness. This weakness led to a traverse of the 3D composite value area, reaching the first downside target of 4254 during the European session.
Ahead of today’s session, the main battle was between returning within the previous month's range or establishing acceptance below the previous week's low, as discussed. The RTH session opened two ticks below the 3D composite value area low, and the market started to sell off immediately, decisively breaking the previous week’s low in the process. The main downside target was the support area 4230/4220, reached already during the initial balance.
An interesting sequence unfolded within this support area, reminiscent of yesterday when buyers approached their final upside target. Today, sellers were approaching the final downside target of 4220 (4224.25), where passive buyers were reloading, absorbing the selling effort. Just like yesterday, but in reverse, the weakness was not confirmed by VIX, which remained below it’s resistance level of 20.34. With that said, it was contextually not optimal to chase shorts, approaching 4220. Subsequently, the market produced a solid 25-handle bounce. This bounce retested the previous week’s low, which essentially determined the outcome of today’s session as sellers defended it. The bottom line here is, if you didn’t have a position going into the RTH session, it was very hard to join the initial downside move, which barely had any pullbacks. Emotional decisions can be easily triggered by the strong downside pace observed in the A-period. As we approached the final downside target of 4220 and VIX failed to confirm weakness, it should have at least kept you from chasing emotionally (FOMO). I will provide a visual of today’s correlation between ES and the VIX levels from previous plan on Substack.
The sellers won today’s battle by establishing acceptance below the previous week’s low after defending the 4275/4285 area yesterday after hours. Monday’s excess low has been taken out in the process. The sellers remain in control as the market is one-time framing down across all time frames. Considering the immediate weakness in the early stages of the overnight session, I will be closely monitoring the 4205 level. Buyers aim to reestablish acceptance within today’s range, targeting the highlighted resistance areas and ultimately a return to value to negate today’s directional move. Sellers are not in any huge trouble as long as the 4222/4232 area remains intact.
For tomorrow, the Smashlevel (Pivot) is 4205, which represents the lower end of today’s RTH range. Break and hold above 4205 would target the resistance area from 4222 to 4232. Break and hold above 4232 would target the resistance area from 4247 to 4254. Holding below 4205, indicating continued weakness, would target the Weekly NVPOC and June low at 4190 and 4178. Break and hold below 4178 would target the final downside target of 4163.
Levels of Interest
Going into tomorrow's session, I will observe 4205.
Break and hold above 4205 would target 4222 / 4232 / 4247 / 4254
Holding below 4205 would target 4190 / 4178 / 4163
Additionally, pay attention to the following VIX levels: 21.36 and 19.02. These levels can provide confirmation of strength or weakness.
Break and hold above 4254 with VIX below 19.02 would confirm strength.
Break and hold below 4163 with VIX above 21.36 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.
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.
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.
Thank you for your consistently exceptional work!
Thank you, buddy! Shorts got us paid today. Your levels are magic!