ES Daily Plan | September 21, 2023

Today’s session resulted in an outside day down, forming a double distribution with one set of single prints.

The very emotional closing session resulted in a downward spike, causing an imbalance between price and value.

ES Daily Plan | September 21, 2023

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Contextual Analysis

During the early stages of the overnight (ON) session, buyers initially struggled to reclaim the Smashlevel of 4494, resulting in a pullback to 4484, where buyers eventually stepped in. Buyers found greater success with 4494 in the European session, managing to break it and test the next level of interest at 4507. The ON high of 4508 ultimately served as the high of the full session.

The RTH session opened with a true gap to the upside, within the highlighted “mini-balance” area, which has proven to be a crucial area throughout this week. The trading activity remained fairly quiet prior to the FOMC meeting, as buyers were unable to break the ON high, while sellers struggled in gaining traction within the previous day’s range. As usual, the market underwent volatility during FOMC. It’s usually a good idea to go flat 30 minutes before the event and save your mental capital for Thursday and Friday, which are generally much better days to focus on. The market experienced a substantial sell-off, leading to the achievement of all the downside targets.

Today’s session resulted in an outside day down, forming a double distribution with one set of single prints in the L-period. The very emotional closing session resulted in a downward spike. The general guideline is as follows: trading within and below the spike base of 4465 (Acceptance) presents a more favorable outcome for sellers, while trading above the spike base (Rejection) is a more favorable outcome for buyers. Note that the fairest price to do business today was at 4500, located in the upper distribution and today’s value is overlapping higher. With that being said, there is an imbalance between value and price, and the most logical response would be that 4500 acts as an upside magnet. Having no interest in going back to the upper distribution provides us with valuable market-generated information. Both the short-term and medium-term values remain at 4500 and 4523, respectively. In summary, the market experienced a directional move away from its established value today. Sellers are aiming to establish acceptance at these lower price prices, preferably below 4465, while buyers aim to negate today's sell-off by re-establishing acceptance within today's upper distribution.

For tomorrow, the Smashlevel (Pivot) is 4465, representing the M-period spike base. Break and hold above 4465, indicating Rejection, would target the resistance area from 4477 to the final upside target of 4487, representing the breakdown single prints in the L-period and the Weekly VWAP. Holding below 4465, indicating Acceptance, would target a downside continuation towards the weekly support area from 4446 to the Weekly Extreme Low of 4415. In the event of an immediate downside continuation, I would exercise caution with initiating new shorts around the 4415 level.

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Going into tomorrow's session, I will observe 4465.

• Break and hold above 4465 would target 4477 / 4487

• Holding below 4465 would target 4446 / 4434 / 4415

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 4487 with VIX below 14.42 would confirm strength.

• Break and hold below 4415 with VIX above 15.86 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.