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ES Daily Plan | October 5, 2023
Today’s session resulted in an inside day (RTH), characterized by its price range being contained within the previous day’s range.
The closing weakness observed in the previous session carried over into the overnight (ON) session, as prices were immediately explored below Tuesday’s low. Sellers were within a 15-handle distance from the Weekly Extreme Low of 4220 when the selling pressure shut off. This led to the formation of a poor low and triggered some short-covering during the European session. The VIX resistance level provided in the previous plan, was 20.90. Today’s HOD was 20.88 during that period of weakness.
Our area of interest ahead of the session was the upper end of Tuesday’s lower distribution. This area acted as resistance in both the ON session's final moments and the early part of the RTH. Initially, buyers were unable to regain control of the 4275-4285 area, giving sellers an opening for a downside continuation. However during the initial balance, sellers failed to breach Tuesday's poor low, indicating an early sign of weakness. Sellers made two additional efforts during the C and D-periods but failed to make any significant progress, resulting in the formation of yet another poor low. These events clearly served as important signals cautioning against shorting in the hole. Today’s session proved to be tricky. Sellers couldn't maintain a downside continuation, and buyers struggled with the single prints from Tuesday's B-period throughout most of the session. It was expected that buyers would face difficulties, as those who were trapped as buyers on Tuesday had now become sellers. In the end, buyers managed to fully close the single prints during the closing M-period spike, but were quickly rejected from Tuesday’s upper distribution.
Today’s session resulted in an inside day, characterized by its price range being contained within the previous day’s range. The market is still one-time framing down across all time frames, indicating that sellers are in full control of the auction, despite today’s price action. My attention will continue to be on Tuesday’s distributions. Buyers aim to establish acceptance within the upper distribution, effectively putting an end to the daily one-time framing down, which could lead to more short-covering and a potential move towards the resistance area at 4340-4350. On the flip side, sellers are aiming to reenter Tuesday's lower distribution, where the last two VPOCs are located. Their objective is to shift the short-term value (5D VPOC) lower and address the unfinished business at the lows. As mentioned, the session ended with an upward spike. Take note of where the spike's base is located, right at the lower end of Tuesday's upper distribution. This serves as a clear inflection point to closely monitor in the short term.
For tomorrow, the Smashlevel (Pivot) is 4297, which represents today’s M-period spike base. Break and hold above 4297, indicating acceptance, would target the upside magnet 20D VPOC at 4315. Break and hold above 4315 would target the resistance area from 4340 to the final upside target of 4350. Holding below 4297, indicating rejection, would target the upper end of Tuesday’s lower distribution at 4282. Break and hold below 4282 would target a traverse of that lower distribution towards the afternoon pullback low at 4266, as well as the final downside target of 4252. In the case of continued weakness, which would require confirmation from the VIX, the target is to initiate the process of completing the downside imbalance below 4252.
Going into tomorrow's session, I will observe 4297.
Break and hold above 4297 would target 4315 / 4340 / 4350
Holding below 4297 would target 4282 / 4266 / 4252
Additionally, pay attention to the following VIX levels: 19.62 and 17.54. These levels can provide confirmation of strength or weakness.
Break and hold above 4350 with VIX below 17.54 would confirm strength.
Break and hold below 4252 with VIX above 19.62 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.