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Market Profile Analysis of S&P Futures 01.03.19

By January 3, 2019No Comments

The Market Profile value areas and ShadowTrader Pivots for /ESH19 and /NQH19 Futures are posted free every morning

in the ShadowTrader Swing Trader newsletter.

Good Morning

market profile

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Check out the notes on the market profile graphic of the S&P futures above. It really jumped out at me when I turned on my monitors this morning. I believe this is the most classic example of “what should be happening isn’t”. Last night, after the close, Apple cut their revenue outlook for the first time in 15 years. To me, and especially against the backdrop of current jitters from a whole slew of areas that are worrying the market, this news could not be worse. When Apple was halted last evening, I thought for sure that we would see NQ’s down 250 or so and /ES off like 50 coming into today’s session. For one short moment in time, I was correct on that as the low in the S&P futures overnight was 2462, exactly 48.50 down from the settlement.

What happened next is where we should all be focusing our attention. While it’s not quite fat enough (think: wide) for a true 45 degree line, it has definitely built out in that direction overnight. This tells us that sellers incrementally painted themselves into a corner by selling at less and less value as the evening wore on. If you don’t want to think about the implications of what buyers and sellers are thinking or doing, then just know that this is simply not a short pattern. Pretend that you are seeing the overnight distribution as an RTH one. You would focus on the width of the profile, the 45 degree line-ish connection from low to POC, and the fact that there is a clear excess low. Beyond all that, you would also note that the meat of the move is within the prior day’s range and also that the excess low cleared the prior day’s RTH low but only by a few ticks and was quickly rejected. All of that happened in the overnight session. Overnight sessions, of course, have less predictive power and import than RTH ones but I strongly feel that traders who avoid analyzing them do so at their own peril.

Coming towards today’s open, overnight inventory is 100% net short but we are trading squarely within yesterday’s RTH range and thus there is no true gap. As I’ve already laid out above, we are also well off of the lows so there is far less to correct than one would think if they just look at the absolute number of how much we are down which is currently 25 in the /ES and 108 in the /NQ.

Opening up in he middle of a range is always a more difficult trade than if we were outside. Momentum is generally hampered within prior day’s ranges and more untethered and free to roam when outside. We are currently just a few ticks below halfback which underscores how middling this open really is.

Value has been overlapping to up for the last two RTH sessions which confirms that the market is struggling to find new buyers outside of the “old business” of short covering that is currently in vogue.

Just give it to me in a nutshell:
-On horrible news from AAPL last night, I feel that futures should be much lower and should not have made the overnight pattern that they did if they were really finding new sellers. As such, traders may be surprised today by a market that is stronger than they think it should be.
-We are currently slated to open very close to the middle of yesterday’s RTH range. As such, we have very little information to go on as to whether or not traders will perceive this as bullish or bearish and thus early trade may be choppy. Caution is warranted.
-The market is not making any definitive (expansion of range, value clean to upside) bullish moves, however it is apparent that there aren’t any stronger sellers either. If S&P futures can get past the 2520 area which has been resistant for a couple of sessions recently, then it could set up a move to the 2600 (low end of the box range) area.

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Have a great day,