ES Daily Plan | September 6, 2023

The market remains in balance across all time frames, with the main focus being on the multi-day balance area in the short-term.

Can initiative sellers take advantage of today's close at the lower end of the balance area?

ES Daily Plan | September 6, 2023

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Contextual Analysis

Given the uneventful nature of today's session and the unchanged context, there's no need for an extensive analysis. The market remains in balance across all time frames, with the main focus being on the multi-day balance area in the short-term.

The general guideline suggests going with the break of the 4-day balance area and observing for continuation (Acceptance) or lack thereof (Rejection). As today’s session concluded at the lower end of the balance area, a downside break is more appealing to go with, primarily because the final downside target is located at 4469. Since the lower end of a balance area is considered support, there is a need for initiative sellers (preferably already during the upcoming overnight session), and a lack thereof will attract responsive buyers. I'm not particularly interested in an upside break, mainly because the final upside target is set at 4540. If there's a lack of continuation after a breakout attempt, the target is a rotation back to the middle and the opposite side of the balance area. As always, when the market lacks a clear directional conviction, it’s crucial to not overstay your welcome in any trade, as today's session reminded us. Both balance extremes are of great importance, as outlined in the Weekly Plan published during the weekend.

“I've included the volume profile from the last five sessions, highlighting the market's formation of a P-shaped profile since the breakout on Tuesday. The key question is whether new buyers can emerge within the 4-day balance area for an immediate upside continuation, or whether a cleanup of Tuesday's breakout structure is necessary first. The purpose of a clean up would be to shake out weak late longs, and attract stronger buyers to enter at lower prices. Sellers are trapped from Tuesday’s session, which can generate responsive buying activity. The most bearish scenario would involve acceptance back within the prior multi-day balance area, below 4469, which would trap buyers from last week.”

For tomorrow, the Smashlevel (Pivot) is 4506, representing today’s value area low (VAL). Break and hold above 4506 would target 4525, as well as the final upside target of 4540, representing the upper end of the balance area. Holding below 4506 increases the odds of a breakdown attempt, targeting 4489, as well as the final downside target of 4469, in the case of a downside continuation.

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Going into tomorrow's session, I will observe 4506.

• Break and hold above 4506 would target 4524 / 4540

• Holding below 4506 would target 4489 / 4469

Additionally, pay attention to the following VIX levels: 14.82 and 13.20. These levels can provide confirmation of strength or weakness.

• Break and hold above 4540 with VIX below 13.20 would confirm strength.

• Break and hold below 4469 with VIX above 14.82 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.