Smash ES Weekly Outlook | December 19-23, 2022

Dec 18, 2022

Weekly Extreme High: 4015
Weekly Extreme Low: 3745

An in-depth daily plan will, as usual, be published tomorrow.

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Last week we talked about the shape of previous week's volume profile, where we spend the most time and volume at the lower end of the profile, note the b-shape. The main area of our interest was that lower distribution, highlighted in yellow. Note how we opened above that distribution on Monday and found buyers when testing it, which resulted in a triple distribution trend day up. Buyers main target was the resistance area 4060 to the Weekly Extreme High 4105, which was tagged already in Tuesday’s session. I've said it many times and it bears repeating, when the Weekly Extreme Highs/Lows gets tagged early in the week, one should be cautious chasing. You want to see established acceptance above, in this case 4105, to be interested in initiating new longs. Note from prior Weekly Outlook:

“Resistance is where you book profits if long and it’s not an optimal location to start initiating new longs”.

We ended up with a look above the prior 4 week balance and fail, which triggered a test of the other side of that balance area. That was achieved on Thursday and on Friday we took out and closed below that large weekly balance.

“Sometimes the market has to rally before it can break”.

Note how that b-shape was resolved after Friday’s session. The market was too short early in the week, meaning we sparked a short-covering rally, which ultimately removes buying interest and thus weakens the market.

For this week, the main focus will be on the level 3913, which is the prior 4 week balance low. Sellers are maintaining control below 3913, while buyers want to regain that level asap. Keep in mind that we closed below a 4 week balance area, meaning we have a lot of buyers on the wrong side. I’m cautious with longs as long as we don’t find acceptance back within that weekly balance area, which then can put a potential look below and fail scenario in play, meaning a potential traverse to the other side of the balance.

The weekly level of interest is 3913. Break and hold above 3913 would target the resistance area from 3970 to the Weekly Extreme High 4015, where selling activity can be expected. The high volume node at 3970 will act as a magnet if sellers fail to follow through to the downside. Note the daily unfilled gap within that resistance area at 3997.

Failure to regain 3913, meaning sellers maintaining control, would target Friday’s low 3855, where we have the 20% correction level 3847. Break and hold below previous week’s low 3855 would target the unfilled daily gap 3825.75 and the support area from 3790 to the Weekly Extreme Low 3745, where buying activity can be expected. We have a weekly NVPOC at 3692 in case of further weakness.

I will interpret the weekly as a 5 week balance after the outside week down we just had, meaning weekly will start one time framing down if 3855.25 is breached. We did take out the monthly balance high by a couple of points. but I will wait until the end of the month to see where we stand on the monthly. Daily is one time framing down. Remember, the balance vs OTF is mainly subjective so this is my personal interpretation.

Upside levels of interest: 3913 | 3970 | 3997 | 4015 | 4060 | 4105
Downside levels of interest: 3850 | 3825 | 3790 | 3745 | 3692

Economic Calendar: December 19-23 | Central Time (GMT -6:00)

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