Smash ES Plan | December 30, 2022

Double distribution day with one set of single prints. No follow through for sellers after yesterday's session led to a vicious squeeze. Will buyers be able to follow through after today's P-shape?

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Recap & Plan

The ON session was trading in a very tight range during Asia session, and sellers were holding below Smashlevel 3815, but we failed to see any price exploration below prior day's low, the selling shut off forming a poor low. Buyers managed to regain 3815 during the Europe session, meaning the traverse of yesterday's value area was in play, as discussed. A full traverse was almost completed prior to RTH open.

If we take a look at the ON profile, we can observe that we basically had a triple distribution and when RTH opened, we filled the first set of single prints and the squeeze continued. The last intraday upside target 3856 was tagged already in A-period, where we briefly paused before continuing towards the 4 day balance high. VIX was not < 21.15, meaning a data point that told me to exercise caution on chasing. Despite the lack of confirmation from VIX, ES squeezed another ~25 handles, and still no confirmation. It's important to note that being cautious chasing is not an invitation to start shorting, not trading is also a position. Note how we didn’t accomplish much after E-period, both buyers and sellers got stopped out left and right.

We talked about the afternoon rally/pullback trade yesterday. G-period ended the intraday one time framing up in similar fashion as previous session, but the big difference today was that we had exceeded the last intraday upside target (3856) quite a bit, meaning the potential for further upside was limited. If the last upside target for today was at 3895 or 3913 and if VIX confirmed market strength, the same setup would have much more potential contextually.

We end up with a double distribution with one set of single prints and an imbalanced profile to the upside. We did take out the 4 day balance high, meaning the daily is one time framing up, but we closed out the session back within that prior balance area. 3875 will be my short-term level of interest. Break and hold above targets the fill section from 12/21 and a potential full traverse of that day’s range. Holding below 3875 targets today’s lower distribution. Note today’s large A-period excess. Buyers not in any huge trouble as long as acceptance is not established within today’s lower distribution.

Tomorrow, pay attention to two additional VIX levels: 22.36 and 20.52. These levels can provide confirmation of strength or weakness. If we break and hold above 3913, a VIX below 20.52 would confirm strength. If we break and hold below 3822, a VIX above 22.36 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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