ES Daily Plan | September 19, 2023

Contextually, not much changed after today's session. Sellers were unable to establish momentum below Friday's lower distribution of interest, while buyers struggled to gain traction above it.

Levels remain unchanged.

ES Daily Plan | September 19, 2023

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Contextual Analysis

The overnight (ON) session stayed relatively quiet until the last two hours before the start of regular trading hours (RTH). It was during this time that sellers managed to break through the crucial 4494 level, representing the 5-day balance low. However, sellers couldn't maintain the breakdown, causing the price to return to the balance range. The upside was capped by the Smashlevel of 4507, with an ON high of 4507.50.

The RTH session opened with VIX trading above its resistance level of 14.42, signaling weakness. The opening bounce was immediately sold, coinciding with the VIX testing the 14.42 level, which now acted as a support. In this sequence, sellers made another attempt to break the 4494 level but once again failed to gain any meaningful traction. Note that there was no 30 min bar close below 4494 today, signaling a lack of initiative sellers. In the previous plan, we talked about the necessity of having initiative sellers with trading near the balance low, and how the lack of it can attract responsive activity. The inability to maintain below 4494 resulted in some responsive activity during the D and E-periods when sellers covered. It’s worth noting that the VIX started to drop below its resistance level already during the C-period, which served as confirmation of the lackluster performance by the sellers. During the PM session, the market was trading within Friday’s middle distribution. However, once the sellers had finished covering their positions, the buyers struggled to make significant progress on their own. Ultimately, the session closed back within the lower distribution.

Overall, not much changed contextually after today’s session. All levels remain unchanged. The daily is technically one-time framing down; however, the market is basically trading within the prior 5-day balance area. Sellers were unable to establish momentum below the "mini-balance" area, and at the same time, buyers struggled to gain momentum above it. In the short term, my attention remains on the highlighted "mini-balance" area, which represents Friday's lower distribution, using 4507 as pivot. Note how the Monthly VWAP, MA50 and now the 5D VPOC are all located within this area.

For tomorrow, the Smashlevel (Pivot) is 4507, representing the upper end of Friday’s lower distribution. Break and hold above 4507, indicating a lack of initiative sellers, would target the resistance area from 4521 to the final upside target of 4530, which is a potential reload area for sellers. Holding below 4507 would target the Weekly level of interest at 4494. Break and hold below 4494, indicating a successful breakdown, would target a downside continuation towards 4475, as well as the final downside target of 4461.75, representing the ESU23 (September) settlement.

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Going into tomorrow's session, I will observe 4507.

• Break and hold above 4507 would target 4521 / 4530

• Holding below 4507 would target 4494 / 4475 / 4461

Additionally, pay attention to the following VIX levels: 14.64 and 13.34. These levels can provide confirmation of strength or weakness.

• Break and hold above 4530 with VIX below 13.34 would confirm strength.

• Break and hold below 4461 with VIX above 14.64 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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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.

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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.