ES Daily Plan | January 11, 2023

Balanced profile with value cleanly lower but a close at highs, above the "Battlefield", where we saw plenty of activity. Friday's J-period single prints filled and excess at today's lows.

Will buyers follow through?

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Recap & Plan

Yesterday's aggressive selling that occurred during the closing session in the RTH extended into the overnight session. The upper fill section was filled and Friday's middle distribution was tested in the process, and found buying activity during the Asia session. During the Europe session, buyers attempted to establish acceptance back within the highlighted battlefield area, but failed just below the Smashlevel 3917, with the ON high 3915.75. The failed attempt by buyers to establish acceptance prompted another downward leg, testing the high volume node from Friday's middle distribution, where sellers got too short, forming an ugly poor low.

The RTH session opened right inside the upper fill section, meaning we experienced a clean up of that area in RTH as well. During the AM-session, trading primarily occurred within the previously identified “battlefield” area, with attempts made to break out of the area both to the upside in the B-period, and to the downside in the C-period. Very “choppy” price action within a very important area. The B-period excess was eventually revisited, but note the C-period excess, which remained untested. Was the clean up of the upper fill section all sellers got this time? The PM-session was much more interesting, as the correlation between the ES and VIX levels from previous plan created opportunities. I will publish a brief recap of today’s correlation on Substack for reference.

The ES and VIX correlation with levels from prior plan

We end up with a balanced profile, with value cleanly lower, and daily back to balance, since yesterday’s low was taken out. I will interpret it as a 2 day balance. Remember, we have carried forward unfinished business at yesterday’s highs and as mentioned, we have excess on today’s lows. We did close out the session with a spike up, since M-period made a new daily high. Observe the orderflow activity at the upper end of today’s profile, aggressive buying/passive selling. Similar as sellers situation yesterday, buyers want a fairly quick follow through, preferable already during the ON session. Acceptance back within the “battlefield” opens up for a test of today’s excess and further weakness targets the lower fill section. Note the confluence there with the last intraday downside target 3885, meaning an area where buyers want to be responsive. On the other hand, a successful upside follow through obviously targets the unfinished business from 1/9. Note the confluence with the last intraday upside target and the unfilled daily gap 3997.

Tomorrow, pay attention to two additional VIX levels: 21.44 and 19.72. These levels can provide confirmation of strength or weakness. If we break and hold above 3997, a VIX below 19.72 would confirm strength. If we break and hold below 3885, a VIX above 21.44 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 Outlook, which provides a broader perspective and highlights significant levels of interest to watch in the coming week.

Smash ES Weekly Outlook | January 9-13, 2023

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