Market Profile Analysis of S&P Futures – 09.25.17

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

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I’ve marked off a few key points in the market profile graphic above that I believe are important carry-forwards as we come into today’s session. As ranges seem to get tighter and tighter, the time between momentum traders shifting from overly long to overly short seems to be shrinking. Astute students (I love the sound of that) of the profile can see them quickly. If we understand this fully, then we know that even stronger signals such as a 45 degree line may not have very lasting effect and we’ll be less surprised (or less stuck in a position that goes from hero to zero in about an hour) when the market abruptly reverses.

For now, maintain the two horizontal lines on the chart as upper and lower references.

As of now we are slated to open with balance and overnight inventory is also balanced with an about even distribution of time on either side of Friday’s settlement. Thus there is no implied bias coming into the open.

Overall, the market may just be looking to ride out the rest of September within this malaise before turning its attention to 3Q earnings which will start coming in early October. I will say in closing that ranges being as compressed as they have been for some time now, we are due for a larger candle. Whether that candle is red or green, really cannot be determined given the information we have and where the market is trading relative to recent range.

My video from this weekend in case you missed it…….

Have a wonderful day,
peter

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

www.windotrader.com/shadowtrader

Little change to value over last four RTH sessions. The poor high(s) still exist up top and as such I’m leaving the note up there until it gets repaired.

This morning we are opening down about 6.25 as of this writing and would be opening on a true gap (outside of prior day’s range), hence gap rules are in play.

Overnight inventory is 100% net short so the early trade will be key in seeing just how much weakness there really is. Think in terms of what should happen versus what actually happens. What should happen? If a market overall is not very weak and any selling is just small breaks here and there which serve to strengthen the market, then prices should have difficulty finding acceptance below the ONL (or perhaps even breaching it) and then move back inside of yesterday’s RTH range whereupon they will find some acceptance and perhaps even move on up to the prominent POC at 2501.25. A weaker market will either start to sell off immediately from the open and stay out of yesterday’s RTH range or will enter it briefly and get rejected quickly. Value will build lower in a breakaway fashion. Then there is of course curtain number 3. That’s where prices move back and forth in and out of yesterday’s range, and value is probably overlapping. This is the scenario that most traders discount or simply forget exists and they thrash about expecting scenario one or two.

The 9/20 low at 2494.00 continues to be a downside reference point. Acceptance below there is more bearish, holding value above is less so.

Have a great day,
peter

**PS: Today at 3pm EST is our first members only webinar for those subscribed to either of our new Options Advisories. There is still plenty of time to sign up to grab your spot. CLICK HERE

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

Some wild action on the heels of the FOMC but little work done to repair the poor highs. Early trade yesterday went above the 2506.00 prior high and promptly failed back into range. We now have a new all time RTH high at 2507.25 on the minimum amount of TPO’s to call it an excess high which would be two.

This morning has us opening back down within range and a the three day balance on a small gap down currently less than a point.

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The upper reference point is that all time high, and the lower is the spiky low that was put in during yesterday’s Yellen swoon.

I remain in the camp that the market is clearly overly long here with plenty of participants with poor location and ripe for a liquidation break. That being said, no such break seems to be occurring and whatever liquidation we do see if rebuffed by buyers very quickly. Then again, liquidation breaks don’t call you up in advance and announce their arrival. Hello, trader……ummm yes this is the market calling, you remember all those back to back poor highs?…..

Value has been unchanged for three sessions now.

Lastly, if you’ve enjoyed my trades and commentary on twitter for the last few years you may want to consider joining one (or both) of our new Options Advisories. As of now I am no longer sharing free trades on twitter and my weekly video will be a recording of the first 10 minutes or so of our new weekly members only webinar that is happening every Friday at 3pm EST. All the chart setups, trade ideas, specifics on how to trade it, live interactive Q&A will be happening there. In addition to live, real-time trades, I will also mostly tweet my market thoughts privately to subscribers only from here on in. Check out the offerings below and if you have any questions at all please don’t hesitate to contact me at asktheshadow@shadowtrader.net.

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

www.windotrader.com/shadowtrader

Back to back poor highs in the RTH sessions and also four sessions total (counting overnights) where we’ve had the same high resistance at 2506.00 Remember that multiple poor highs stack exponentially in terms of how powerful they can be. While the obvious first response is the back off from the poor highs that action has been very minimal so far. Overnight sessions have had some minor weakness but certainly nothing to write home about. Dear Mom, this market is relentless, miss you bunches, your little shadow…………..

Yesterday’s value area was again very tiny. This is certainly not high confidence at these levels but could be due to market starting to coil up ahead of today’s FOMC announcement at 2pm EST. That being said, expect that markets might be tight until that news is out. Volume on the /ES was very low yesterday ending well south of 1m contracts traded by end of day.

Yesterday’s POC was prom9nent at 2404.75.

Overnight inventory is very balanced and as of now we are slated to open within balance.

Have a great day,
peter

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

www.windotrader.com/shadowtrader

Yesterday’s high was poor.

There was no migration of the POC higher as it remained in the middle of the range.

Overnight activity is contained within yesterday’s range and as of now we would be opening on a very small gap within balance.

Nasdaq 100 futures (/NQ) were showing some relative weakness yesterday and could be a drag on the /ES today if they continue in that vein.

Overall, the status quo remains; slowly higher on poor structure and lack of elongation.

FOMC meeting announcement tomorrow at 2pm EST. No change is expected to rates at this meeting.

Have a great day,
peter

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

www.windotrader.com/shadowtrader

At least as far as overnight action is concerned the market is treating the last four days as less of a poor high where longs are trapped and more of a consolidation of the gains of September 11th.

Overnight inventory is 100% net long and we are currently gapping up 3.25 as of this writing. As the futures have made a new all time high in the overnight session, that is the upside reference which is at 2504.50 for today.

On the downside, I would not pay attention to the ONL, but rather Friday’s RTH high at 2498.00, a breach of which would represent a move back into the prior session’s RTH range and could bring in short term sellers who are trapped long in the overnight session. On such a move I would be watching closely to see if prices accept back inside the four day range or reject quickly and start to build breakaway value. That in and of itself is probably the most important gauge of intraday strength while trading. On further selling into Friday’s range, the obvious target would be the TPO POC at 2495.25. This is another way of measuring momentum and “feel” of a market. A market should test the point of control before rallying further if it wants to stay on firm footing. Will it? Does it? All questions you should be asking all the time.

Although my conclusion to what I thought would happen (liquidation break) was wrong, the analysis was sound. I leave you with the video of what I was thinking/seeing on late Friday….

Have a great day,
peter

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

Welcome to options expiry, we got fun and games…

There was a tiny little excess high (which would fit in the category of lack of material excess) yesterday that repaired the prior two session RTH highs. While it’s easy to see this as look above and fail, and technically it is, I believe that it’s the overall feel of the day that matters a lot more. The market just ground around all day yesterday on slow tempo and relatively low volume. Brad noted that only 573,000 e-mini S&P’s had traded at 11am EST. Those who consistently pound the table for a correction should ponder that one man’s poor high is another man’s consolidation. While continued knocking on resistance and not getting a breakout IS clearly a sign of traders getting longer and longer, one should never assume that a liquidation break is a foregone conclusion. Sometimes a market is pausing at the highs before higher and sometimes it’s long in the hole which increases the odds of a break greatly.

Coming into this morning’s action we have two back to back prominent TPO POC’s close to each other, indicative of a lot of balance up at these all time high levels. Overnight trade is indicating a gap down of about 3.50 in the S&P futures and 7.75 in the Nasdaq 100’s. There was some news last night which took futures down to the gap low to the tick and they have since recovered. Don’t gloss over the fact that the ONL is right at the bottom of the gap. Stronger sellers are simply not present here as of now.

Overnight inventory is 100% net short this morning, however as of now we would be opening within balance, thus the gap is nothing to be too concerned about.

I believe that ONL discussed above is the key reference point for today. Anything above is nothing more than status quo.

I’ll have more detailed comments on the SquawkBox this morning as I’m taking over the duties from Brad all day. As nothing changed value-wise yesterday, assume that all previous comments still stand unless we find acceptance outside of this range. Today is options expiry which also generally makes for choppy, rangebound trade. I make it a rule not to trade /ES on OPEX days, something that has served me well over time.

Have a great day,
peter

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

www.windotrader.com/shadowtrader

What I’m seeing as the key takeaways from the market profile graphic currently are all noted on the chart. The market is backing off overnight here on the heels of some back to back poor highs. Remember that when they stack like that it’s exponentially powerful. Focus on the fact that short term action is overly long at those highs rather than thinking about the repair which would be bullish. The picture is bullish for now, but the main thing to note is that there are definitely some traders stuck long at those levels. Given that, we know that the market should come in a bit. If it doesn’t at all, then it’s very strong, indeed.

The bottom of that first small gap (2487.00) is my main focus in early trade. If that can’t even get filled, then again, there is very little interest out there on the part of sellers. Note that we have a VPOC at 2485.50 just below. Again, a market that is backing off will move towards these signposts and then either reject (bullish) or blow through (more bearish). All can be tradeable turning points for the agile trader.

Overnight inventory is very balanced this morning and I’m noting that the majority of the weakness in the futures happened just recently, more than likely driven by 8:30am EST economic data. This in and of itself is a sign to me that stronger sellers are not present. Feels like knee-jerk reaction to news.

2495.50 is the main upside reference which is an all time high and also a double top both with the overnight session that preceded it and the prior RTH session whose high was just a couple ticks below.

Yesterday’s value area was very squat and is only 9 ticks from high to low. It left a very prominent POC inside of it which should be carried forward. This area may be revisited today on a rally as prominent POC’s have greater odds of being tested than less prominent ones.

As always, pay attention to where value develops. That is and will always be the most important thing to remember as you go about your trading day. As my mentor in the profile James Dalton often remarked, “we trade value, not price”.

Have a kick-ass day!
-peter

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

As per my tweets yesterday, slightly overbought market coming into yesterday’s close as the new all time high was made on a balancing day with a wide TPO POC. This generally leads to retracement overnight especially when coming on the heels of two days in a row of 100% net long overnight inventory. I called for a smal short on the /ES close at 4:15pm EST and some small profits were possible from that.

Currently we are gapping down about 4 handles and are slated to open within balance. Overnight inventory is net short but not nearly 100% so.

I’ve marked off all the downside references on the chart which are two unfilled gaps and a prominent VPOC below us. Stronger sellers would put these into play. 2486.25 is important today as is the prior all time high of 8/8. Acceptance below this area would denote yesterday’s range as excess and we could see a rotation back down into balance. Unchanged to higher value today keeps the status quo (rally) going.

Have a great day,
peter

Value Areas and POC figures for /ESZ7 and /NQZ7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.

www.windotrader.com/shadowtrader

It is common for a market to follow through a second day when you have a gap and go situation like we had yesterday. Hence the futures currently trading up 5 on overnight inventory that is 100% net long again. Keep that in mind as it gets exponentially important when it’s stacked like that.

The overnight action puts us above the 8/8 high which was the all time high. The ONH at 2491.00 is the only upside reference as there is no resistance above it.

On the downside, be on the alert for a liquidation break. There are now back to back VPOC’s below us and the one from the 9/8 session is very prominent. Continue to carry that forward. If such a break should occur remember to think in stages and judge the strength or weakness of the move by how far it goes and what checkpoints along the way it is able to cross through. Yesterday’s RTH high, yesterday’s VAH, yesterday’s POC and so on and so on.

Overall the tone remains bullish on less than stellar structure. Some confidence came into the market yesterday but it also had a lot of the hallmarks of short covering. Volume was decent which is a bullish point.

Have a great day,
peter