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Smash ES Plan | December 27, 2022
We end up with an inside day on Friday with value overlapping higher and an imbalance to the upside on the profile. Friday's main distribution is of interest short-term.
Recap & Plan
Friday’s ON session was perfectly balanced, trading within prior day’s range and we got some fills of Thursday’s A-period excess. Sellers were active around 3870 where we had very aggressive selling on Thursday’s session, which we can identify on the delta profile from that session.
RTH opened below Smashlevel 3856 and the 20% correction level 3847 and we got an impulse move higher to test that area immediately, and that attempt was immediately met by sell activity at 3854.75. Failure to regain 3856 and sellers were targeting another test of the 3822-3815 area, where we have the Monthly Extreme Low 3815. In the previous plan, we emphasized the importance for buyers to defend that area, which they were able to do successfully (LOD: 3821.25).
We end up with an inside day with value overlapping higher. The general rule is to go with the breakout of the inside day. 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 of. Lack of continuation (Failed breakout / Look above/below and fail), you want to fade and target other side of the inside day. If we take a look at the shape of Friday’s profile, we can see that the profile is imbalanced to the upside, forming a “P-shape”, meaning we have unfinished business at the highs that potentially will get cleaned up. A successful break of the inside day to the upside would target fills of the poor structure highlighted from 12/21 and a potential full traverse of that day’s range for another test of 3913. Note that the last intraday downside target for tomorrow is around the low of the inside day, meaning to go with a breakdown can be tricky and needs confirmation of weakness. Be aware of false breaks, especially to the downside.
Tomorrow, pay attention to two additional VIX levels: 21.79 and 19.95. These levels can provide confirmation of strength or weakness. If we break and hold above 3913, a VIX below 19.95 would confirm strength. If we break and hold below 3815, a VIX above 21.79 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 Outlook, 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.
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