ES Weekly Plan | January 2-6, 2023

🟨 Daily: BALANCE | 4 Day | H: 3882.75 L: 3804.50
🟥 Weekly: OTFD | Ends: 3882.75
🟨 Monthly: BALANCE | 4 Month | H: 4141 L: 3502

Weekly Extreme High: 3990
Weekly Extreme Low: 3730

As usual, a detailed daily plan will be published tomorrow.

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During the previous week, we only had 4 trading sessions and remained in a consolidating phase, resulting in an inside week. An inside week refers to a week in which the trading range is completely contained within the extremes of the previous week. Inside weeks don’t end one time framing, meaning we are technically still down on the weekly, but the last two weeks have shown a clear pattern of consolidation, suggesting that we may be preparing for a directional move.

Remember that markets are constantly shifting between balance and imbalance.

Over the past two weeks, market participants have been in agreement on value and every deviation from value has been met with an opposing response, meaning the mean reversion strategy (Buying below value/Selling above value) has been very effective. However, this dynamic will change at some point, meaning buyers will be convinced that the market is undervalued or sellers may believe it is overvalued, leading to a directional move. When this occurs, it is important to monitor for continuation or a lack thereof, and to be aware that using the same mean reversion strategy may not be appropriate if the new move establishes acceptance.

For this week, the main focus will be on the extremes of the inside week. The general rule is to go with the breakout. Break to the upside, you want to be a buyer. Break to the downside, you want to be a seller. Monitor for continuation or lack thereof. Lack of continuation, you want to target other side of the inside week. A 100% range extension to the upside would align with the HVN at 3960, which is located within the resistance zone.A 100% range extension to the downside would align with the Weekly Extreme Low 3730.

The weekly level of interest is 3880. Break and hold above would target the prior 4 week balance low 3913, where the previous week's high is located, as well as the MA50. Break and hold above 3913 would target the resistance area from 3950 to the Weekly Extreme High 3990, where selling activity can be expected. The high volume node around 3960 will act as a upside magnet if buyers manage to break the inside week to the upside. Note the confluence with daily unfilled gap at 3997 and the Weekly Extreme High 3990.

Holding below 3880 would target another test of 3815, which is the prior Monthly Extreme Low. Break and hold below 3815 would target the support area from 3770 to the Weekly Extreme Low 3730, where buying activity can be expected. In the event of further weakness, there is a weekly NVPOC at 3692.

Upside levels of interest: 3880 | 3913 | 3950 | 3990 | 4035
Downside levels of interest: 3847 | 3815 | 3770 | 3730 | 3692

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Economic Calendar: January 2-6 | Central Time (GMT -6:00)

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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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