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Smash ES Plan | December 28, 2022
Basically another inside day as Friday's high was taken out by two ticks. We continue to balance, meaning the market is waiting for more market generated information. Stay nimble.
Recap & Plan
The ON session opened with a gap up and Friday’s imbalance to the upside got resolved. Note how nicely we filled the poor structure from 12/21 in the process. A passive seller was sitting at 3900.50 reloading. The aggressive buyers were unable to push through the passive limit orders due to insufficient size, leading to a reversal. The ON gap got filled prior to the RTH open.
Since nothing has really changed contextually, there is no need to review today’s price action. I posted a recap of today’s auction on Twitter, showing how today’s B-period left very poor structure behind and how we came back down to clean up that structural deficiency, and once completed, a reversal followed off that 20% correction level 3847 for a trade back to value.
We ended up taking out Friday’s high by two ticks, meaning it’s basically another inside day, with value unchanged. 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.
A successful break of the inside day to the upside would target the prior 4 week balance low 3913. A successful break of the inside day to the downside would target the 3800 century level. Note the volume profile on the far right, we are right within the high volume area, meaning the market is in balance coiling for a directional move.
Tomorrow, pay attention to two additional VIX levels: 22.61 and 20.69. These levels can provide confirmation of strength or weakness. If we break and hold above 3913, a VIX below 20.69 would confirm strength. If we break and hold below 3800, a VIX above 22.61 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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