ES Daily Plan | March 14, 2023
ES Daily Plan | March 14, 2023
Despite the volatility seen in today's session, there were no significant changes observed overall.
The release of CPI data is scheduled for tomorrow, and it will certainly continue to move the tape around. Stay nimble.
Contextual Analysis
I transitioned to the ESM23 contract today. Please note that I do not back-adjust my charts. Based on the information provided in the previous plan, traders who were able to trade during the overnight (ON) session had many trading opportunities available. To emphasize this point further, I will publish a separate recap on my Substack.
The ON session saw an impulsive move to the upside at the beginning of the session that reached the last intraday downside target of 3950. If you didn’t participate in that move, it wasn’t favorable to start chasing after reaching 3950 so quickly. The price experienced a noticeable stall around 3950 that lasted for several hours. The buyers were eventually able to break out from that distribution, leading to a test of the next level of interest at 3970, which found selling activity. The European session opened around 3970, which was 20 handles above the last intraday upside target. However, the VIX did not confirm the strength and remained above 23.20. This clearly indicates that there were few reasons to look for long setups and it was reflected by the significant weakness that followed. The market experienced a reversal of 130 (!) handles, reaching the last intraday downside target of 3847 before regular trading hours had even begun.
At the start of the RTH session, we observed the market opening at the lower end of Friday's range. We looked below Friday's low of 3846.25 in the A-period but sellers failed to gain downside traction. Notably, during the initial dip, the sellers were unable to breach the overnight low of 3839.25, which was an interesting observation. This sequence triggered short-covering, leaving behind large excess in A-period. VIX spiked viciously today, and was at one point trading above 30. As the VIX remained above 26.40, indicating market weakness, the RTH open presented a challenging situation. The crucial aspect was the sellers' inability to break and hold below 3847, as this would have made any reversal setups highly unattractive. We were one time framing up intraday and it was now the buyers turn to attempt to break Friday’s range. Similarly, this attempt was rejected, leading to a rotational PM-session.
Overall, today's volatile moves did not result in any significant changes. The daily has returned to balance, and my attention is focused on the edges of this area of balance. The sellers remain in control as they continue to build value at these lower prices following last week’s weakness. Note how the “mini-balance” area continues to find selling activity. We end up with a P-shape profile, characterized by an imbalanced profile to the upside. The CPI data is scheduled for release tomorrow, and as usual, it is expected to bring volatility in the market. The levels remain mostly unchanged.
Going into tomorrow's session, I will observe 3920.
Break and hold above 3920 would target 3934 / 3950
Holding below 3920 would target 3890 / 3855 / 3847
Additionally, pay attention to the following VIX levels: 28.26 and 24.80. These levels can provide confirmation of strength or weakness.
Break and hold above 3950 with VIX below 24.80 would confirm strength.
Break and hold below 3847 with VIX above 28.26 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.
Be sure to check out the Weekly Plan, which provides a broader perspective and highlights significant levels of interest to watch in the coming week.
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. Twitter: @smashelito | FAQ: smashelito.com
I switched to M contract as well. With bears unable to force a breakdown, and CPI overall not increasing, a squeeze is always around the corner
Positive delta today might not mean as much as in "normal" days considering much of it is rolling activity