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ES Weekly Plan | May 29 - June 2, 2023
Below are my expectations for the week ahead.
🟩 Daily: OTFU | Ends: 4165.50
🟨 Weekly: BALANCE | 3-Week | H: 4225.75 L: 4111.75
🟩 Monthly: OTFU
Weekly Extreme High: 4320
Weekly Extreme Low: 4130
As usual, a detailed daily plan will be published tomorrow.
The previous week was very interesting as the absence of initiative buyers during Monday’s session led to responsive selling. We discussed a scenario in which the market experiences an immediate pullback before addressing the unfinished business from the prior week's high. In this scenario, our intention was to observe whether any buying activity will emerge at lower prices. This played out perfectly as the market came down to the weekly support area on Wednesday, tested the prior Weekly Extreme Low of 4110 (LOD: 4114), and a noteworthy reversal of 100 handles followed. It’s always tricky to short weekly support areas in an uptrend.
For this week, the main focus will be on determining whether the drop observed during the previous week has attracted strong enough buyers at lower prices to be able to clean up the unfinished business from the week before last, which remains unresolved. The daily and the monthly are one-time framing up, while the weekly has returned to a 3-week balance. Balance rules apply (see Substack for details).
Balance Rules: The general rule is to go with the break of the balance area. Break to the upside (Look above and go), you want to be a buyer. Break to the downside (Look below and go), you want to be a seller. Monitor for continuation (Acceptance) or lack thereof. Lack of continuation (Failed breakout / Look above/below and fail), you want to fade and target other side of balance.
Note that the market closed at the upper end of the weekly balance area, indicating that buyers are leaning towards two possibilities: an immediate breakout attempt or continuing to consolidate near the highs (preferable above 4195) before making a breakout move. As always, the upper end of a balance area is considered resistance until proven otherwise. Conversely, the lower end is viewed as support. Note that the weekly balance low is weak, characterized by multiple closely clustered daily lows. Be aware of false breakouts.
The weekly level of interest is 4195, which represents the lower end of Friday’s upper distribution. Notably, this level is also the high of the previous month (April). This indicates that if buyers can achieve a closing price above it on Wednesday (EOM), the month of May will be characterized as an "outside month up" following the look below and fail on 5/4 (Island Reversal Gap). Holding above 4195 would target the daily NVPOC from 8/19 at 4230, as well as the low of the 4-day balance area established during the August swing high at 4255. Break and hold above 4255 would target the resistance area from 4285 to the Weekly Extreme High 4320, where selling activity can be expected. Take note of the August high of 4327.50, which is located slightly above.
Break and hold below 4195 would target the support area from 4165 to the Weekly Extreme Low 4130, where buying activity can be expected. Note how this area coincides with the medium and long-term value at 4138, which will serve as a downside magnet in the absence of an upside follow-through. For any significant change to occur in the bigger picture, the sellers would need to break and hold below the Weekly Extreme Low, with a weekly close below it being preferred.
🟩 Upside: 4230 | 4255 | 4285 | 4320 | 4327 | 4360
🟥 Downside: 4165 | 4130 | 4083 | 4055
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.