Smash ES Plan | November 18, 2022

The last intraday downside target met in the ON session and we saw an impressive reversal in RTH.

Pretty straightforward now, acceptance or rejection from the prior 4 day balance area is what I'm observing.

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Recap & Plan

The ON session initially traded within prior day’s value and when Europe opened, the upper end of the inside day was tested and buyers got trapped, failing to follow through. When we reject one side of the balance, we usually end of testing the other side of it, which we did and sellers followed through. We got a break of the inside day and the 4 day balance to the downside, which was sellers main objective. In case of a break and hold below 3951, the magnet was 11/10 NVPOC 3915, as outlined in the plan. I pointed out the daily lows we had close to each other and notice the volume profile from the overnight session around that area, stops getting hit leaving poor structure behind.

RTH opened with a very large true gap down and note that we already tagged the last intraday target 3915 in the ON session. I typically go into defense mode when we open on large true gaps with main targets already met, meaning I’m very cautious chasing more downside initially. If I’m short biased I need to be patient and wait for higher prices to short. Going into defense mode doesn’t necessarily mean that I look for longs to be clear. An immediate follow through for sellers would be to break the ONL and hold below, that would signal extreme weakness but that was a tough task since we had already cleared all intraday targets. Failing to follow through often triggers an inventory correction, which we got for a trip up the first set of single prints from the ON session. Buyers failed to fill them and found selling activity, which was that potential short setup at higher prices. C and D-period consolidated within the initial balance and until that balance was resolved, there wasn’t really any point initiating any trades except for pure scalps. If IB low was to break, we know that we have very weak tape and can look for rallies to short and if IB high was to break, we know that we have plenty of late shorts to squeeze. Remember the prior 3 week balance high 3925? Trapped sellers from that breakout got a chance to get out today and for that reason it was not an optimal area to initiate new shorts. The gap ended up getting filled, which obviously was a better area for patient sellers to short, leaning against the blue distribution after a 50 handle rally, knowing that longs most likely will book profits in that area. Overall, a very weak performance from sellers to let such a large gap get filled.

We talked about false breakdowns, and we actually end up closing back within the prior 4 day balance, meaning we keep it fairly simple for tomorrow. Buyers want to hold above 3950 to target a traverse of the blue distribution and potentially the other side of the 4 day balance. Sellers obviously want to break and hold below 3950 to once again test the prior weekly balance breakout point. Daily is one time framing down and if today’s high is taken out, I’m cautious on the short side. Was today’s pullback what buyers needed for another leg up?

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