ES Daily Plan | September 20, 2023
The daily one-time framing down remains intact, as sellers continue the pattern of lower highs and lower lows.
In the short term, the primary focus is on whether buyers can regain acceptance within previous week's range.
Contextual Analysis
The overnight (ON) session was similar to that of yesterday's, where the upside was capped by the Smashlevel of 4507, with an ON high if 4509.50, followed by liquidation that breached the previous week’s low before the start of regular trading hours (RTH).
The difference in today’s RTH session was that it opened below the previous week’s range, and buyers immediately encountered difficulties in regaining traction within that range. The opening bounce was sold, and sellers saw a downside continuation with pace. The second downside target of 4475 was reached already during the initial balance (first hour of RTH). 4475 provided a very shallow bounce before selling activity was observed, resulting in another leg to the downside. As 4475 was breached, the VIX also broke its resistance level of 14.64, confirming weakness. The market started to consolidate at the lows for a couple of periods, which is always a caution sign when having a trend day to the downside, as the market tends to flush. The VIX held above its resistance during this consolidation, and the market eventually reached the final downside target of 4461.75 (LOD: 4462.25). I will consider the roll gap filled and remove the reference. It’s always wise to consider booking profits around the final downside target, regardless of whether the market continues its downward trajectory or not, as regular readers are aware. The PM session saw a reversal that retraced the entire RTH session. Did you notice how VIX dropped below its resistance already in the H-period? If you hadn't initiated any short positions up to that point, it wasn't favorable to start doing so when the VIX started to decline significantly, and the final target downside target was already met. I suspect many late sellers found themselves in a difficult position, which likely contributed to the substantial squeeze in the latter part of the session.
The daily one-time framing down remains intact, as sellers continue the pattern of lower highs and lower lows. In the short term, the primary focus is on whether buyers can regain acceptance within the range from the previous week, which could trigger a move towards the 20D VPOC. Failure to do so is signaling continued weakness. Tomorrow, we have the FOMC meeting, which, as always, is expected to bring significant volatility.
For tomorrow, the Smashlevel (Pivot) is 4494, representing the previous week’s low. Break and hold above 4494, indicating that today’s session was a look below and fail, would target 4507, coinciding with the MA50. Break and hold above 4507 would target the resistance area from 4521 to the final upside target of 4530. Holding below 4494, indicating continued weakness, would target 4484. Break and hold below 4484 would target fills of structure towards today’s VPOC at 4470, as well as the final downside target of 4456 in the case of continued weakness.
Going into tomorrow's session, I will observe 4494.
Break and hold above 4494 would target 4507 / 4521 / 4530
Holding below 4494 would target 4484 / 4470 / 4456
Additionally, pay attention to the following VIX levels: 14.72 and 13.50. These levels can provide confirmation of strength or weakness.
Break and hold above 4530 with VIX below 13.50 would confirm strength.
Break and hold below 4456 with VIX above 14.72 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.
Thank you, buddy. I missed the short play at the open but did get longs around midday.
You nailed today's low almost to the T! Thank you for your work!