- True gapThere is a lot of discussion as to what constitutes a gap. Is it measured to the prior day's close, or to the prior day's high or low? Here at ShadowTrader, we believe that it is always and only to a prior day's high or low, thus creating a true gap or space on the chart between one day and the next. Thus a true gap is one that has price opening completely outside of the prior day's range (either above the high or below the low) and anything else is just a gap that has far less import. As a gap is a "reordering of thinking", only a true gap really changes the tone and creates opportunity to trade earlier (near the open) rather than later. More higher on net long o/n inventory
- Trade negotiations with China continue to unfold ahead of the November 10 trade truce expiration. Bloomberg reports that President Trump stated soybeans, rare earth materials, and fentanyl are his main concerns with China that will be addressed in talks set to take place in Malaysia this week.
- Overnight activity had very minor price exploration into Friday’s range potentially indictive that sellers are stepping aside.
- The market will receive a hefty batch of earnings reports this week that will include nearly one-fifth of the S&P 500.
| Pre Market Indications | ||
| Opening In/Out Balance | out of balance | |
| Overnight InventoryA way of measuring overnight activity in the futures market by just noting how much of the overnight activity happens to fall above the prior day's settlement value (4:15pm EST close) and how much falls below. If more activity is above the settlement, then overnight inventory is said to be net long. If more is below, then it is said to be net short. If all of the overnight activity is above the settlement, then it is said to be 100% net long. If all of the activity is below the settlement then it is said to be 100% net short. The overnight inventory situation matters most and has the most impact on early trade when it is skewed 100% in either direction because when the imbalance is very large like that then the odds of an early correction increase greatly. This is due to the fact that most... | net long | |
| Current Price/Overnight Range | middle third | |
| Shock and AweA term Peter uses to describe what overnight futures traders may be feeling when faced with an open that is wildly divergent from what they expected. Large gaps in either direction that are opening well outside of range are examples of this. The approach is that when the market opens in such a manner, there is often opportunity to trade earlier rather than later because of the large contingent of traders who will be forced to reverse their positions quickly. | yes | |
| Potential for Early Trade | yes | |
| Short Term Bias | neutral | |
Scenarios
- I believe the starting point this morning is that Friday’s strong close was a surprise to many sellers. The true gapThere is a lot of discussion as to what constitutes a gap. Is it measured to the prior day's close, or to the prior day's high or low? Here at ShadowTrader, we believe that it is always and only to a prior day's high or low, thus creating a true gap or space on the chart between one day and the next. Thus a true gap is one that has price opening completely outside of the prior day's range (either above the high or below the low) and anything else is just a gap that has far less import. As a gap is a "reordering of thinking", only a true gap really changes the tone and creates opportunity to trade earlier (near the open) rather than later. More higher only adds to that, creating some shock and aweA term Peter uses to describe what overnight futures traders may be feeling when faced with an open that is wildly divergent from what they expected. Large gaps in either direction that are opening well outside of range are examples of this. The approach is that when the market opens in such a manner, there is often opportunity to trade earlier rather than later because of the large contingent of traders who will be forced to reverse their positions quickly.. I see potential for higher, especially if the POCPoint of Control, also known as the "fairest price to do business". It is the price level in the /ES where the greatest amount of volume in the prior RTH session traded. ShadowTrader measures the POC using volume but the traditional way is to mark off the widest point of the day's distribution where the most TPO's printed going across from left to right, indicating that that was the price where the most time was spent. It's important to pay attention to both the volume POC and the TPO POC. is not tested or is tested and we cannot move lower.
- Plenty of nuance in the upper half of the distribution, all of which are key levels. Use them all as signposts on any move lower inside of range and also as bullish signals given which ones are not tested.
- Market continues to be somewhat on edge regarding newsflow around China and tariffs. The most powerful long signal is still if there is a trendline break as I describe in the video.
| Today’s Market ProfileA way of reading the market that recognizes either time spent or volume traded at a particular price level. A market profile can be either made up of “TPO’s” (time price opportunities), or volume. TPO’s measure how much time was spent at a particular price, while volume-based market profiles measure how much volume traded at a particular price. Generally, market profile is used in the trading of futures, especially the /ES. ShadowTrader utilizes volume based profiles. Chart |
The chart provided is from WindoTrader. CLICK HERE to learn more about the ShadowTrader discount. Interpret the chart above with the Market Profile Key.
| Key Levels for Today | ||
| 6744.50 | Bottom of Single PrintsAny section of the market profile distribution that is only one TPO wide. Single prints are a sign of emotional buying or selling as very little time was spent at those levels and thus there is no value there. The endpoints of single print sections are considered to be potential support or resistance points. 10.16 | |
| 6737.50 | ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm EST and 9:30am EST the next day. | |
| 6718.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High | |
| 6712.00 | Bottom of Single PrintsAny section of the market profile distribution that is only one TPO wide. Single prints are a sign of emotional buying or selling as very little time was spent at those levels and thus there is no value there. The endpoints of single print sections are considered to be potential support or resistance points. | |
| 6707.00 | POCPoint of Control, also known as the "fairest price to do business". It is the price level in the /ES where the greatest amount of volume in the prior RTH session traded. ShadowTrader measures the POC using volume but the traditional way is to mark off the widest point of the day's distribution where the most TPO's printed going across from left to right, indicating that that was the price where the most time was spent. It's important to pay attention to both the volume POC and the TPO POC. | |
| 6700.00 | Top of Single PrintsAny section of the market profile distribution that is only one TPO wide. Single prints are a sign of emotional buying or selling as very little time was spent at those levels and thus there is no value there. The endpoints of single print sections are considered to be potential support or resistance points. | |
| 6697.25 | Bottom of Single PrintsAny section of the market profile distribution that is only one TPO wide. Single prints are a sign of emotional buying or selling as very little time was spent at those levels and thus there is no value there. The endpoints of single print sections are considered to be potential support or resistance points. | |
| 6679.25 | HalfbackA term for the halfway point between the high and low of any session, could be a day session or an overnight session. On Peter's market profile charts it is always a dark yellow horizontal line at that level. | |
| 6640.50 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low | |
| Virgin Point of ControlAlso called “POC” for short. The level in the futures inside the value area where either the greatest amount of volume traded in the prior session, or the greatest amount of time was spent as measured by the number of TPO’s going across. Measured this way, the POC would be the widest part of any given market profile. While ShadowTrader calculates its value areas and points of control using volume exclusively, we are always very aware of where the TPO POC is and it’s relation to current prices or patterns in the profile. Both are very important. (VPOCVirgin Point of Control. This is a point of control level that has not yet been tested (traded through) during an RTH session. If the POC gets tested during an overnight session, it does not count and remains "virgin" until it happens during a day session.) | ||
| none | ||
| Today’s ESThe S&P 500 e-mini contract. In the broadcast we use this as our primary instrument to define market direction and effect short term trades when we have a bias in the market. This is the electronic contract that trades around the clock, as opposed to the pit traded contract. Sometimes the pit traded version is called the “big contract”. Futures contracts on are denoted by two letters and then a letter and a number to define their expiration month. The ES has four contract periods per year which expire in March, June, September, and December. These four months are denoted by the letters H, M, U, and Z. For example, if it was 2012, then the March contract would be called the /ESH2. Thinkorswim requires a forward slash before the letters. Certain trading platforms and charting packages ma... and NQThe Nasdaq 100 E-Mini futures. In the broadcast we only discuss this contract in the pre-market to get a feel for where the Nasdaq will open. Market ProfileA way of reading the market that recognizes either time spent or volume traded at a particular price level. A market profile can be either made up of “TPO’s” (time price opportunities), or volume. TPO’s measure how much time was spent at a particular price, while volume-based market profiles measure how much volume traded at a particular price. Generally, market profile is used in the trading of futures, especially the /ES. ShadowTrader utilizes volume based profiles. and Pivot Point Numbers | ||
| Value Area HighThe high end of the range of the value area. | 6715.50 | 25029.00 |
| Point of ControlAlso called “POC” for short. The level in the futures inside the value area where either the greatest amount of volume traded in the prior session, or the greatest amount of time was spent as measured by the number of TPO’s going across. Measured this way, the POC would be the widest part of any given market profile. While ShadowTrader calculates its value areas and points of control using volume exclusively, we are always very aware of where the TPO POC is and it’s relation to current prices or patterns in the profile. Both are very important. | 6707.00 | 25000.00 |
| Value Area LowThe low end of the range of the value area. | 6667.50 | 24806.00 |
| R3 | 6811.00 | 25520.75 |
| R2 | 6764.50 | 25288.25 |
| R1 | 6733.50 | 25137.50 |
| Pivot | 6687.00 | 24905.00 |
| S1 | 6656.00 | 24754.25 |
| S2 | 6609.50 | 24521.75 |
| S3 | 6578.50 | 24371.00 |
